Financial consequences from active addiction can be a major stressor during early recovery. It is possible to pay off debt, set a budget, and achieve financial freedom. 

Facing the consequences of active addiction can be a harrowing aspect of one’s journey to recovery. Some people are faced with crimes from their past or burned bridges; other people may find themselves in poor financial standing either struggling to get by or drowning in debt.

No matter the consequence of past substance use, recovery is possible. Recovery does not just mean abstaining from substance use but also returning to or reaching an effective level of functioning. This deeper level of recovery is just as possible as abstinence from substance use. To heal the damage of the past, a person must first face consequences such as debt.

Facing Debt in Recovery

A common challenge for people just beginning their journey to recovery is being faced with debt. While debt may be overwhelming it is possible to get into good financial standing. When preparing to face debt and beginning to create a debt repayment plan, there are several considerations to consider:

Be Aware of Triggers

Just as it is important to be aware of your triggers for substance use, when looking to improve your financial status, you must consider triggers for unnecessary or excessive spending. Consider: Do you rely on retail therapy when you are having a bad day? Do you lose track of what you are spending when you use a credit card? Does casual online browsing tend to lead to an online shopping spree? Tracking your expenses and spending habits can be helpful in identifying what situations most often lead you to overspend.

Don’t Get Overwhelmed

It may take considerable time but with patience and commitment, it is possible to get out of debt and stay out of debt. If not handled promptly, debt will likely increase and compound the feeling of being overwhelmed. Understanding the process of becoming debt-free and accepting that it may take a considerable amount of time can help to ease feelings of being overwhelmed.

Know When to Seek Help

Know when to ask for help to avoid getting to a point where relapse seems like the only viable option. If you are unable to cover your basic needs such as food and shelter, it is likely time to seek assistance. Even before it gets to this point it can be helpful to speak with a debt counselor from a nonprofit agency. You may wish to check out the National Foundation for Credit Counseling, a nonprofit financial counseling organization with offices in every state. A credit counselor can offer tools and resources to help slow the buildup of interest and regain financial control.

Once you are ready to create your debt repayment plan, there are several initial steps that should be taken.

Step 1: List all of your debts.

First, you should identify each debt that you have to pay. You may also wish to include the minimum monthly payment, interest rate, and how much you owe in total for each debt. This list should be comprehensive and include all debts you may have including credit cards, personal loans, student loans, car loans, home loans, money borrowed from family and friends, past-due bills, and any other source of debt you can think of.

Step 2: Rank your debts.

Next, you should rank your debt in order of which you would like to pay them off. There are several strategies for doing this. Many people prefer to pay off debt starting with the smallest total amount and working their way up to the largest total amount. This is often called a debt snowball. The debt snowball is thought to provide quicker reinforcement through the accomplishment of paying off a debt entirely, even if it is the smallest source of debt. 

Another common approach is to pay off debt based on interest rates starting with the highest. This approach may not provide the gratification of paying off a specific debt as quickly, but it is the method that is likely to save you the most money. 

In other cases, a person may decide to pay off debt based on the debtor. For example, someone may feel they should repay their family and friends before repaying debts to financial institutions. Regardless of the method that is chosen, it is important to stick to the selected method and avoid straying from the debt repayment plan.

Step 3: Identify any debts that need to be handled immediately.

In some cases there may be debts that need to be paid as quickly as possible. For example, if you are facing eviction due to unpaid rent or your utilities are at risk of being turned off, you may want to focus on these sources of debt first. If you do not have the money upfront but know you will be receiving money soon, you may wish to speak with your debtor to schedule a payment in advance. In some cases, a landlord may charge a fee but postpone eviction if this is the case.

Step 4: Focus on one debt at a time.

When paying off debt, taking one debt at a time as the primary focus is considered the best approach. While the minimum payment must be made on all debts each month, any additional money that can be put towards repayment should be put towards the top priority debt. 

In the debt snowball method, this would mean paying any extra money towards the lowest total debt. Once this debt is completely paid off, the minimum payment for it, along with any additional money able to be put towards debt, should go to the second ranking debt each month. After this second debt is paid off, the same total amount and any additional money would be paid towards the third ranking debt. This cycle would continue until all debt had been paid off.

In the debt avalanche method, the same principle applies as in the debt snowball. However, instead of moving through the ranking of debts from lowest total debt to largest total debt, you would start with the debt which has the highest interest rate and slowly work your way to the debt with the lowest interest rate. 

It may be helpful to find additional sources of income to put towards debt repayment. In the most basic sense, this may mean cutting back spending in other areas by sticking to a budget and distinguishing between needs and wants. It may also be helpful to find a part-time job or ask for additional hours at your current job. It may be possible to sell no-longer needed items to earn extra money. You may also choose to use all money received in the form of gifts or bonuses to debt repayment.

Step 5: After repaying one debt, move onto the next.

While it may feel like cause for celebration once one debt is repaid, avoid the temptation to reward yourself with spending. You can reach your goal more quickly if you maintain focus on the end goal of being debt-free and stay committed to your plan.

Step 6: Build savings.

Once you have paid off all your debt, you should begin to deposit money into a savings account to safeguard you against unexpected expenses. Having an emergency fund can prevent future debt. You may even wish to initially build a small amount of savings when starting to repay debt in case you find yourself in a financial emergency during this time.

Learning to Budget in Recovery

Many skills are learned in recovery–relapse prevention, coping skills, interpersonal or social skills, and more. But one of the skills that is most necessary to recovery and often overlooked is financial literacy. It is important to learn how to budget money when embarking on any recovery journey.

By learning to budget, you can avoid future debts and save money allowing you to reach other goals such as buying a home. While a budget may feel uncomfortable or even frustrating at first, it is a highly effective method for meeting your financial goals and getting out of or avoiding debt. There are two types of financial obligations to consider when first constructing your budget. These are:

  • Past Financial Obligations include any unpaid bills or debts that may be present due to financial decisions during active addiction. Just as you must pay your monthly expenses, these past obligations that have yet to be paid need to be factored into any budget. Often these will have a set monthly payment and will decline over time.
  • Current Obligations include all of your monthly expenses such as rent or mortgage payments, transportation, food, entertainment, and more. Some of your current obligations will not be monthly expenses such as clothing and routine car maintenance. It is important to factor in for these expenses when creating your budget. Any unexpected expenses such as a car repair can be covered either by this allotted money in your monthly budget or from your emergency savings account.

When creating your budget it may help to keep it as simple as possible. You may choose to search for a budgeting plan or spreadsheet online, download a budgeting app, or stick to a handwritten budget.

Whatever you decide, the most important thing is to be consistent. A very basic budget may consist of totaling all of your monthly earnings and subtracting your set monthly expenses such as housing and other bills. The difference between your monthly income and your set monthly expenses is the amount you have to work with or your spending allowance. This amount includes contributions to savings or retirement accounts, entertainment, and more. You may choose to budget out this amount by category or simply keep your spending within the range of your spending allowance.

Needs vs. Wants

When reducing expenses and setting up a budget, it becomes necessary to differentiate needs vs wants. While the difference may seem clear-cut, determining what is a need vs want can sometimes be more difficult than expected. While most people would agree that housing is a need, the line blurs when the question of what type of housing is posed.

Some people may view a house with a yard as a necessity while others would view this as a luxury. It is all a matter of perspective. Ultimately, what you allot for each need will be based on your personal values and choices. It may help to first identify your total monthly income and then determine if the amount you allot to certain needs is within reason for your income bracket. Perhaps you will find that you can afford to live in your dream home, but you may also realize that doing so is preventing you from repaying your debt.

You may decide to rent a room or downsize into a smaller home. Perhaps the best way to determine if something is a need or want is to ask if you can remain comfortable without it.

Financial Freedom on the Journey to Recovery

Much as a weight is lifted once active addiction becomes part of the past, the experience of paying off debt can be liberating. Being accountable for your finances and taking the responsibility to fix the errors of your past can be a major step in your journey to recovery. Simply having a budget in place and a clear plan of action can considerably reduce the stress associated with financial struggles such as debt.

There are resources for individuals facing debt on their recovery journey. Whether you or a loved one is about to enter treatment and is fearing to face the financial consequences from active addiction, or are finding the stress of debt to be affecting recovery, there is help. The Recovery Village has comprehensive treatment programs for substance use disorders and can provide the support needed to get through periods of stress through their array of services offered including both inpatient and outpatient programs. Speak with a representative to learn more about your options today.

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Editor – Daron Christopher
Daron Christopher is an experienced speechwriter, copywriter and communications consultant based in Washington, DC. Read more
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Medically Reviewed By – Denise-Marie Griswold, LCAS
Denise-Marie Griswold is a Licensed Clinical Addictions Specialist. She earned her Master's Degree in Substance Abuse and Clinical Counseling from East Carolina University in 2014. Read more

Caldwell, Miriam. “How to Set Up a Debt Repayment Plan in 6 Easy Steps.” The Balance, November 12, 2018. Accessed August 12, 2019.

Lockert, Melanie. “Your guide to understanding credit counseling.” Credit Karma, August 12, 2019. Accessed August 12, 2019.

Medical Disclaimer

The Recovery Village aims to improve the quality of life for people struggling with substance use or mental health disorder with fact-based content about the nature of behavioral health conditions, treatment options and their related outcomes. We publish material that is researched, cited, edited and reviewed by licensed medical professionals. The information we provide is not intended to be a substitute for professional medical advice, diagnosis or treatment. It should not be used in place of the advice of your physician or other qualified healthcare providers.