Many recovering substance abusers do not recognize the toll addiction takes on their finances, making managing finances a critical aspect of their recovery process. This could lead to bankruptcy, homelessness, unemployment, and depression – factors which negatively affect the chances of recovery.
At PCP we are dedicated to helping people struggling with substance use disorders (SUD) achieve financial literacy and independence while successfully maintaining sobriety.
This article examines how addiction affects your finances, the importance of financial literacy during addiction recovery, and some money management tips for building financial independence on the road to recovery.
How Addiction Affects Your Financial Stability
● Poor decision-making. Addiction is often associated with impulsiveness and reckless decision-making. Addicts are more likely to make risky investments and neglect responsibilities such as rent, mortgage payments, or savings.
● Funding their addiction. Addicts spend a large part of their income on sustaining their addiction (for example drugs, gaming, or gambling). This leaves little or no money left for other financial obligations, often leading to payment delinquencies and debt. This often leads to accumulating outstanding debts, which can be a significant hurdle in the recovery process.
● Legal fees. The link between crime and drug use is well-established and has been studied thoroughly. Addicts often commit crimes to fund their addiction. This results in a long list of arrests, legal problems, fines, and court fees.
● Healthcare costs. Chronic drug use takes a significant toll on your health and can be linked to heart, lung, and liver disease. Even acute intoxication increases your risk of workplace injuries, car accidents, and serious harm. The cost of medical bills can add up quickly, further straining an already tight budget.
● Unemployment. Drug addiction is linked to a higher rate of workplace absenteeism, work-related injuries, and employee turnover. Loss of income due to unemployment often worsens the already dire financial situation of many drug users.
● Addiction treatment costs. The NHS provides free or heavily subsidized detoxification and drug rehabilitation services. However, individuals who use private addiction treatment centres often have to pay high out-of-pocket costs, even with the help of insurance.
● Low savings. Many addicts neglect to save for several reasons like poor financial literacy, large amounts of debt, unemployment, and addiction habits eating into the emergency savings.
● Lack of support networks. The strain addiction places on personal and professional relationships means that addicts are often isolated. This cuts them off from potential sources of financial support. It also reduces their creditworthiness, making it difficult to obtain loans.
● Loss of assets. Individuals struggling with SUD may be forced to sell valuable assets, such as homes, cars, or jewellery to support their addiction or pay off debts.
Importance of Financial Literacy During Addiction Recovery
● Helps those in recovery achieve self-sufficiency and independence. Developing money management skills is crucial for achieving self-sufficiency and independence. This increases self-confidence, improves mental health and gives them a degree of agency over their lives.
● Better finances reduce stress levels, which is essential for maintaining financial stability and a smoother recovery journey. Consequently, this can lead to lower relapse rates and a smoother recovery journey.
● Individuals in recovery can be vulnerable to financial exploitation. Financial literacy equips them with the knowledge to recognize and avoid scams and predatory financial practices.
● Understanding financial principles helps individuals make informed decisions about spending, investing, and saving.
● Financial literacy aids in setting realistic financial goals and developing a plan to achieve them. This gives those in recovery a sense of purpose and direction.
Useful Money Management Tips During Addiction Recovery
Seek professional advice. A financial advisor or a recovery-focused financial planner can provide tailored advice and strategies. Professionals can help you better grasp your financial situation, set realistic goals, and create a personalized plan for managing your money effectively during recovery. They offer services like budget planning, and debt management, and help you navigate the confusing world of personal finance. Consider sharing your budget with a trusted family member for added accountability.
Be disciplined. Track every expense, prioritize essential spending, and avoid impulsive purchases. Consistent, disciplined money management helps build financial stability and prevents financial stress from exacerbating issues related to substance abuse.
Create a strict budget. Budget creation is essential for managing your income and expenses effectively. Allocate funds for necessities, savings, and debt repayment. Make sure to allocate a portion of your budget to building an emergency fund to cover unexpected expenses. Regularly review and adjust your budget to align with your financial goals.
Focus on improving your creditworthiness. Improving your credit score allows you to access better financial products and opportunities. Pay bills on time, reduce outstanding debt, and avoid unnecessary credit applications.
Develop a sustainable debt management strategy. Develop a realistic plan to manage and repay your debts. Prioritize high-interest debts, consider debt consolidation options, and reach out to creditors to renegotiate more favourable repayment terms.
Utilize community resources. Take advantage of community resources such as local non-profits, government programs, and support groups. These resources can offer financial assistance, educational programs, and emotional support, helping you stay on track with your recovery and financial management goals.
Look into safe investment options. Once you have a stable financial foundation, consider safe investment options like a savings account to grow your savings. Low-risk investments such as savings accounts, bonds, or index funds can provide steady returns while minimizing risk.
Differentiate between your long-term and short-term financial goals. Develop short-term goals like a monthly budget, paying off debts, and building financial literacy skills. Also, keep track of longer-term objectives like home ownership and investing in your professional and educational development.
Understand the different types of debt relief options. Explore various debt relief options to find the best solution for your financial situation.
Debt Consolidation: This involves combining multiple debts into a single loan with a lower interest rate. It simplifies payments and can reduce overall interest costs.
Debt Settlement: This strategy involves negotiating with creditors to reduce the total amount of debt owed. It can significantly lower your debt, but it may impact your credit score.
Credit Counselling: Credit counselling agencies help create a debt management plan, offering advice on budgeting and managing debt. They may negotiate lower interest rates with creditors on your behalf.
Bankruptcy: A legal process that can eliminate or restructure your debts. While it provides a fresh start, it has a long-lasting impact on your credit score and should be considered as a last resort.
Find a sustainable source of income. Get help finding employment by using unemployment services, volunteering, and attending job fairs. Avoid jobs that could jeopardize your sobriety. Do not mention your past struggles with addiction unless directly asked or if it is legally required.
Each option has its benefits and drawbacks, and understanding them can help you make an informed decision to manage and reduce your debt effectively.
Seek Help Today
Financial literacy is a major part of successful addiction recovery and provides the tools needed to rebuild your life and achieve long-term stability. By understanding and managing your finances, you can reduce stress, prevent relapse, and regain control over your future. Organizations like the Substance Abuse and Mental Health Services Administration (SAMHSA) offer valuable resources and financial assistance for those in recovery.
Educate yourself, seek professional guidance, and utilize available resources. Begin your path to financial freedom and recovery by contacting PCP for tailored support and financial literacy programs designed to empower you and ensure lasting sobriety.
Author
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Perry is the founder of Rehab Today by PCP and opened the first treatment centre at Luton in 2004. Perry’s background apart from his own personal struggle with addiction over 20 years ago is in the recruitment industry where he started his career and became Finance Director of a UK PLC and in the late 90’s was part of a new start up and became the leading recruitment consultancy in Intellectual Property across Europe. Perry is passionate about recovery from addiction and liaises with family members to coordinate admissions, often sharing his own experience to help people when they first admit into treatment. Most certainly the driving force behind the success of Rehab Today by PCP which now boasts 60 primary and 68 move on beds in all locations. Perry is a keen fitness fanatic and Arsenal fan!
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