A serious financial setback can happen at any time in life, and it can take many different forms: a lost job, a broken appliance, a prolonged illness or injury, divorce, death of a partner, an accident resulting in mounting medical bills, or a natural disaster that affects home or work.
Like any other traumatic event, a financial setback can take a toll on your wellbeing and will take time to recover from. But it isn’t the end of the road! Follow these steps to successfully handle a financial setback and develop financial resilience.
Don’t let emotions rule your decisions
Financial decisions and emotions rarely mix well. Studies show that stress reduces the ability to make smart money decisions. Grief, shock, and decision-making demands take up a lot of room in your head. If you understand this, you can work to separate your emotions from your next money moves. And it’s ok to manage your emotions and self-care first!
Reset your budget
The next step in managing your new financial reality is to create an adjusted budget for yourself, taking into account any new expenses, lost income, and insurance involvement. You can update your budget in the same way you built the earlier version: list any income streams then list all expenses and whether they’re fixed (rent, car payment, insurance) or flexible (gas, food, entertainment). Make sure your income is greater than your expenses in your new scenario. If it falls short, now is the time to start scaling back expenses and/or finding other income sources. The sooner you trim expenses and avoid wiping out your savings, the longer you have to overcome the setback.
Other options to help your budget include filing for unemployment, filing for a disability insurance payout, contacting Social Security if your spouse died, dipping into savings, refinancing a mortgage or car loan, or requesting deferred payments from your lenders.
If the financial setback is the reason you’re considering building a budget for the first time, there are many helpful websites, blogs, finance platforms, and professionals at your credit union who can help you out—for free!
Take care of yourself
Missing out on quality sleep, not eating or not eating a healthy diet, not drinking enough water, and not getting out in the sunshine to move your muscles can all make handling stress and anxiety feel even harder. Taking care of yourself is an important part of financial resilience—you need to be in good mental and physical shape!
As part of the care for yourself and your finances, don’t let pride or fear stop you from asking for help. And don’t feel like you need to have all of the answers or a perfect new budget right away! Small steps like curbing one area of spending or increasing some emergency fund saving are all admirable steps.