Financial setbacks can happen to anyone, regardless of their income or assets. It can be in the form of unexpected medical expenses, job loss, high-interest debts, or a combination of factors. But the good news is, they are not permanent.
Based on the survey conducted by Ameriprise Financial, 73% out of 3,000 respondents went through at least one significant financial setback at some point, and 89% of them have managed to put their finances back in order or are on the road to recovery.
So, don’t lose hope if you’re currently experiencing difficulties in your financial health. You can always rebuild your nest egg with careful planning and the right strategies. But first, read on to find out how you can cope with personal financial setbacks.
Evaluate Your Current Situation
Being realistic is the first key to navigating a financial setback successfully. It won’t help if you don’t face and accept the problems head-on. But to make that possible, you should have an accurate idea of where you stand financially. Are you dealing with a one-time and temporary setback? Or is it more of a long-term or perpetual financial issue?
By evaluating your current situation, you can understand better how much work you need to do. Note that you can’t use a short-term solution to a long-lasting problem. It will only worsen your financial situation. So, you need to know what you’re dealing with and take responsibility for whatever setback you’re facing. This way, you can direct your energy to find solutions.
Determine Available Financial Resources
When money is tight, it’s essential to determine what financial resources are available to you. Do you have enough earnings to pay for debts and unforeseen expenses? If you’re dealing with medical bills, can they be covered by your insurance? Or, if you’re laid off, do you have an emergency fund at your disposal while you look for a new job?
Whatever the reason is for your financial setback, you will need to look at your resources so that you can make decisions more efficiently. To help you do this, you can simply calculate your net worth by subtracting your total liabilities from your assets. You’re most likely to have a negative net worth if you’re experiencing financial trouble.
Prioritize Your Spending
Once you have a clear picture of your situation and the resources available, you’ll need to identify where to make changes. Note that with any financial difficulty, re-evaluating your budget and spending is crucial. You will not be able to spend money the same way that you did before the setback.
Your current situation can pull your previous budget into different directions, but prioritizing is the key. Re-evaluate it and see what items are essential and which ones you can cut. Cutting back just on discretionary spending like cable subscriptions, eating out, and entertainment can make a big difference. You can always go back on them once you’re financially stable.
Find More Income
Aside from reducing your expenses, consider looking for ways to earn more income. It can be selling valuable items that you don’t use anymore or getting a side hustle. Remember that being creative is one of the essential ingredients in making any financial setback a success.
Just think about all of your skills and abilities, then make a plan on how you can monetize them. For example, many online businesses require little cash to operate, such as freelance writing, graphic design, and virtual assistant.
Get Some Financial Help
The last thing you need when you’re facing a financial setback is to take on more debts. But often, spending less and finding more income may not be enough to meet some significant financial needs. That said, it wouldn’t hurt to look at various financing options like multi-month loans if you are struggling financially.
But make sure only to borrow what you need and what you can comfortably afford. It’s also best if you work with a financial planner so you can better explore your options. They are more knowledgeable in creating decisions and goals that will lead you to financial recovery.
Reach Out To Your Creditors
It can help to reach out to your creditors if there are some bills you cannot afford to pay on time. Make sure to inform them about your financial setback. Many creditors offer various repayment options for people who are experiencing financial hardships.
It can be deferring payments for several months, reducing your payment plan, or refinancing a loan. As long as you are proactive and honest about your situation, you can get more favorable treatment from your creditors.
Be Patient With Your Financial Progress
Recovering from a financial setback takes a lot of time. So bear in mind that you may not see the results of your effort and plan right away. But what’s more important is you do everything in your power to make adjustments to your finances and find ways to earn more. Always be patient with your financial progress, and don’t hesitate to seek help if you need it.