You hope that you’ll never need to use your emergency savings, but unfortunately, financial disaster can strike at any time. Though we can’t predict emergencies or crises that may arise, unexpected expenses don’t have to ruin your financial plan for all time. Here are six tips for bouncing back after a financial setback.
Common financial disasters
There are several common ways that your finances can take a significant hit.
Overwhelming Medical expenses
The unfortunate reality of America is how much it costs to have an injury or an illness. Fortunately, a personal injury attorney like this can help mitigate financial ruin and ensure you receive any compensation to which you’re entitled.
Cars are as helpful as they are expensive, and accidents can happen anytime, regardless of safe driving practices.
Lack of budgeting
If you don’t keep track of where you’re spending your money, you find out too late that you’re living beyond your means.
Loss of income
Not everyone has guaranteed job security. The loss of a job or a lowered monthly salary can cause problems for that living paycheck-to-paycheck or with little emergency savings.
Evaluate your situation
This step might seem obvious, but you need to step back and look at your situation after the initial setback occurs. Investigate any possible avenue for earning and saving.
Consider also the scope of the bill you’re facing. Is this a one-time fee? Is it a long-term payment plan? When are the payments due? How much are you in the hole for? These questions can be painful to answer, but the first step to recovery is arming yourself with all relevant information.
Update your budget
Make an Excel spreadsheet with your monthly income and all of your monthly expenses, including small things like subscriptions and how many times a month you eat takeout. Next, go through your list and look for ways to either increase your income or decrease your expenses.
If you’re not one for crunching numbers, there are numerous budgeting apps to help you out.
Make a recovery plan
Once you know where you stand with your money, dedicate time to making a long-term recovery plan. If you’re on a monthly payment plan, prioritize this payment and other necessary bills in your budgeting. Consider temporarily cutting out less necessary expenses like entertainment or new clothing until you’ve recovered.
Pinch those pennies
Every budgeting list has this entry, but being frugal will help you stand back up much more quickly than spending recklessly. Cooking at home, using rewards cards at local stores, and making coffee at home help keep money in your account.
Find additional income
Not everyone has the time or energy for more than one job, but if you’re able, look into getting a side gig or additional hours at your current job. This measure can be temporary until you’ve gotten stable again, but any extra income helps.
Save up where you can
It’s difficult to save when many people live paycheck to paycheck. Saving your money up in any increment will help prepare you for any future emergencies or next steps in your life. Even if you can only afford five dollars per paycheck, it’s better than nothing.
Saving money can be like building a house of cards in that it only takes one blow to destroy your hard work. With that said, you can recover from financial setbacks. Stay calm, and pinch your pennies where you can.