Life is full of unexpected surprises. Some of these surprises are pleasant and welcome, but others can cause nothing but trouble – and financial setbacks are particularly bothersome.
If you have been sticking to a budget, paying down debt, and generally managing your finances with aplomb, a financial setback can feel like a defeat. Everything was going well, and now you find yourself having to reevaluate your carefully-formulated plans. Whether it’s experiencing an accident and finding yourself having to take time off work, or incurring a huge unexpected expense that you didn’t have the opportunity to budget for, finding your motivation to recover from the setback is always going to be a challenge. However, with a clear course of remedial action, you should be able to get back on track – and here’s a step-by-step guide to help you achieve just that…
Step One: Assess the damage
If your income has been reduced due to an accident, or your savings unexpectedly depleted by a sudden expense, then it’s important to face this fact head on. Sit down and configure your finances so you know exactly what you are dealing with; estimates of the ‘damage’ will only cause further harm.
Step Two: See if there is anything you can recoup from the incident
It’s worth taking the time to investigate your options regarding recouping some of the costs you have incurred. If you have been injured in an accident, then you may want to consider taking the time to find a lawyer here in an effort to ascertain if you have any right to compensation. For unexpected expenses, investigate if there is anything you can do to financially benefit in some way; for example, if you’ve had to buy a new fridge, perhaps you can get cashback or credit card points for the purchase. Essentially, investigate ways in which you may be able to make lemonade out of unexpected lemons.
Step Three: Implement a new budget to suit your circumstances
In the aftermath of a financial setback, you will need to reconfigure your budget. It may be beneficial to look for low-hanging fruit that you can trim back; for example, entertainment subscription services can usually be removed without having too great an impact on your life.
Step Four: Look for ways to enhance that budget
Now that you have your new budget, explore options that may allow you to enhance it. For example, you could try using online survey sites, or try out one of these side hustle ideas.
Step Five: Adjust your long-term financial goals
Finally, when you have gone through all of the above, look to your long-term financial goals and adjust them accordingly. If you were saving for something special, or had a “debt-free date” in mind, then push these back sooner rather than later. It may be tempting to hope that your new budget will mean you’ll still be able to meet these goals, but this could mean that you set yourself up for failure. It is better to make the adjustment quickly – if you happen not to need the extension, then that’s great, but if you do need it, it’s there to ensure you don’t become too disheartened.
It’s important to remember that financial setbacks are inevitable and, unfortunately, there is no way of planning for them. However, you can control how you react to them, and it’s your reaction that will ultimately decide how big an impact these setbacks can have.