How To Manage Your Finances After Addiction

Substance addiction takes a significant financial toll on individuals, families, communities, and society as a whole. Addiction can rapidly impact financial resources, leaving individuals and their dependents grappling with overwhelming debt. Addiction often brings about increasing impulsivity and can severely impact an individual’s financial decision-making.
Some of the most prevalent financial burdens are outlined below.

Financial impacts

• Cost of substances: Illicit drugs can be expensive, especially if purchased at street value or on the black market. In the case of alcohol, while drinking, people may be inclined to buy rounds of drinks for friends, shop online, gamble, or buy food impulsively.
• Healthcare costs: These can be substantial, including medical consultations, hospitalisations, and medications.
• Lost productivity: Substance addiction can severely impact an individual’s ability to function effectively in their personal and professional life. It can lead to absenteeism, reduced productivity, and work-related accidents or injuries.
• Criminal justice system costs: Substance addiction often leads to criminal behaviour, such as drug possession, distribution, or related offences. These costs, including arrests, investigations, prosecutions, and incarcerations, can be substantial.
• Treatment and rehabilitation: Seeking treatment for substance addiction is crucial for recovery. However, the costs of rehabilitation programmes, counselling, detoxification, and ongoing therapy all mount up.

Creating a workable budget

Budgeting realistically in post-addiction life is crucial for maintaining financial stability and supporting your recovery journey. Remember, budgeting is a continuous process that requires discipline and flexibility. It may take time to find the right balance, but with persistence and commitment, you can achieve financial stability in your post-addiction life.

Here are some steps to help you establish a realistic budget:

• Assessing your financial situation: Start by evaluating your income, expenses, and debts. Take stock of your financial resources and determine your fixed expenses (e.g., rent, utilities, or loan payments) and variable expenses (e.g., groceries, transportation, or entertainment).
• Prioritise essential expenses: Identify your essential expenses, such as housing, utilities, food, transportation, and healthcare. These should be the first items accounted for in your budget. Ensure that you allocate enough funds to cover these necessities.
• Set realistic goals: Establish short- and long-term financial goals. These can include paying off debts, building an emergency fund, or saving for specific needs. Long-term goals may involve saving for retirement, homeownership, or education. Set goals that are attainable and align with your financial capabilities.
• Track your spending: Maintain a log of your expenditures to understand your spending habits better. Utilise a budgeting application, spreadsheet software, or even just pen and paper to monitor your daily spending. This practice will enable you to pinpoint areas where you can reduce expenses and tweak your budget to ensure you stay on track.
• Cut unnecessary expenses: Review your discretionary spending and identify areas where you can reduce or eliminate expenses. This could include dining out less frequently, cutting back on entertainment subscriptions, or finding more affordable alternatives for certain products or services.
• Set up an emergency fund: Set aside a portion of your income to create an emergency fund. This fund acts as a safety net for unexpected expenses, such as medical emergencies or car repairs.
• Seek financial counselling or support: Consider seeking guidance from a financial counsellor or support group specialising in post-addiction recovery. They can provide personalised advice, help you create a budget, and offer strategies for managing your finances effectively.
• Avoid impulsive spending: Be mindful of impulsive spending, which can be a common challenge in post-addiction life. Ask yourself if the item or experience is necessary and aligns with your financial goals.
• Monitor and adjust: Regularly review and evaluate your budget to ensure it remains realistic and effective. Life circumstances and priorities can change, so be prepared to make adjustments as needed.
• Celebrate milestones: Acknowledge and celebrate your financial milestones along the way. Recognise and reward yourself for your efforts. As such, positive reinforcement can motivate you to continue practising healthy financial habits.

​Managing and reducing debt

Managing and reducing debt accumulated during addiction can be challenging, but with a strategic approach, it is possible to regain control of your finances.

Here are some steps to help you manage and reduce your debt:

• Seek support: Reach out to support groups or organisations specialising in assisting individuals with debt management and addiction recovery. They can offer guidance, resources, and a supportive community to help you navigate debt repayment challenges.
• Face your debt: Take a comprehensive inventory of all your debts. Gather statements, bills, and documents related to your loans, credit cards, and any other outstanding balances. Note the total amount owed, interest rates, minimum payments, and due dates for each debt.
• Create a budget: Establish a realistic budget to track your income and expenses. Prioritise essential expenses (e.g., housing, utilities, food, healthcare) and allocate a portion of your income towards debt repayment.
• Negotiate with creditors: Contact your creditors to discuss your situation. Explain your commitment to repay your debts and inquire about possible options for lowering interest rates, reducing monthly payments, or negotiating a settlement.
• Prioritise high-interest debts: Focus on paying off debts with the highest interest rates first. You can save money on interest payments over time by targeting these debts. Make minimum payments on all other debts while channelling extra funds towards the high-interest debt.
• Explore debt-management programmes: Investigate reputable debt-management programmes or credit counselling services. These organisations can provide guidance, negotiate with creditors on your behalf, and help you create a structured repayment plan.
• Avoid incurring new debt: As you work towards reducing your existing debt, it’s crucial to avoid adding new debt. Resist the temptation to rely on credit cards or loans to finance expenses.
• Increase your income: Explore opportunities to increase your income, such as taking on a part-time job, freelancing, or pursuing additional education or training to enhance your earning potential.

Rebuilding your credit score

Rebuilding your credit score during addiction recovery may take time and effort, but it is certainly possible. As you continue your addiction recovery journey, rebuilding your credit can be a crucial step towards achieving long-term financial stability.
Here are some pointers to help you rebuild your credit:

• Review your credit report
• Address outstanding debts
• Establish a budget
• Make timely payments
• Avoid new debt
• Monitor your progress
• Become an authorised user (If you have a trusted family member or friend with good credit, ask them to add you as an authorised user on one of their credit cards. Their positive credit history can benefit your credit score, but establish clear expectations and guidelines to avoid potential issues.)

It is important to note that the financial toll of substance addiction goes beyond mere numbers. The impact on relationships, families, and quality of life cannot be measured solely financially. Tackling substance addiction and its accompanying challenges necessitates a holistic strategy encompassing prevention, education, early intervention, readily available treatment options, and support for those in recovery. By allocating resources to prevention and treatment initiatives, society can alleviate the financial strain of addiction and foster healthier communities.