Menu #39: How to recover from financial setbacks

STATS STACK 🥞

46% of U.S. adults are considering switching jobs within the next year for better pay or benefits, driven by inflation and rising living costs. (Source: CNBC)

$2,000 is the average amount of debt that Gen Z has accrued on Buy Now, Pay Later platforms, as younger generations increasingly use these services for everyday expenses. (Source: TransUnion)

$1.18 million is the new threshold for what’s considered “rich” in America in 2024, up from $1 million in 2023, as inflation redefines wealth expectations. (Source: Charles Schwab's Modern Wealth Survey)

DEEP DISH 🍕

How to recover from financial setbacks

Let’s talk about something we all experience at some point: financial setbacks. Whether it’s an unexpected job loss, medical expenses, or any other curveball life throws our way, setbacks can be challenging. But don't worry—bouncing back is possible. Let’s explore some strategies to help you recover and get back on track.

Recognize and Accept the Setback

The first step to overcoming a financial setback is recognizing and accepting what’s happened. It’s normal to feel a range of emotions, from frustration to anxiety. Take a deep breath and give yourself permission to feel these emotions. Accepting the situation is the first step toward moving forward.

Assess the Situation

Once you’ve come to terms with the setback, it’s time to assess your current financial situation. Take a close look at your finances:

• Income: What sources of income do you still have? This might include savings, unemployment benefits, or part-time work.

• Expenses: List all your expenses, from rent and utilities to groceries and discretionary spending.

• Debt: Review your debts and their interest rates.

Understanding your financial landscape will help you make informed decisions about your next steps.

Prioritize Your Expenses

In a financial crisis, it’s essential to prioritize your expenses. Focus on covering your basic needs first:

1. Housing: Ensure you can keep a roof over your head.

2. Utilities: Keep the lights on and the water running.

3. Food: Budget for groceries and essential supplies.

4. Transportation: If you need a car to get to work, ensure you can cover gas and maintenance.

After covering your necessities, see if there are any non-essential expenses you can cut back on or eliminate temporarily.

Create a New Budget

With a clear picture of your finances, create a new budget that reflects your current situation. Allocate your income to cover your prioritized expenses. If possible, set aside a small amount for savings, even if it’s just a few dollars a week. Every little bit helps and can provide a cushion for future unexpected expenses.

Explore Income Opportunities

If you’ve lost your job or your income has been significantly reduced, it’s time to explore new income opportunities. Consider the following options:

Part-time or Temporary Work: Look for part-time or temporary jobs to bring in some income while you search for a permanent position.

Freelancing or Gig Work: Utilize your skills for freelance or gig work. Websites like Upwork, Fiverr, and TaskRabbit can help you find opportunities.

Side Hustles: Think about starting a side hustle that aligns with your interests and skills. This could be anything from tutoring to selling handmade crafts online.

Communicate with Creditors

If you’re struggling to pay your bills, don’t hesitate to reach out to your creditors. Many companies offer hardship programs or payment plans that can provide temporary relief. Explain your situation and ask if they can offer any assistance, such as reduced payments or waived fees.

Seek Support

You don’t have to go through this alone. Seek support from friends, family, or community resources. Many communities offer food banks, financial counseling, and other services to help those in need. Additionally, talking to someone you trust can provide emotional support and help you feel less isolated.

Focus on Long-Term Goals

While it’s essential to address immediate needs, don’t lose sight of your long-term financial goals. Set small, achievable goals to help you stay motivated and make progress. This could include:

Building an Emergency Fund: Even if you can only save a little, start building or rebuilding your emergency fund.

Paying Down Debt: Make a plan to tackle your debt once you’re back on your feet. Focus on high-interest debt first.

Rebuilding Credit: If your credit has taken a hit, work on rebuilding it by making on-time payments and keeping balances low.

Stay Positive and Resilient

Financial setbacks can be tough, but remember that setbacks are temporary. Stay positive and focus on the steps you can take to improve your situation. Resilience is key—every small step forward is progress.

Final Thoughts

Handling financial setbacks is challenging, but with the right strategies, you can bounce back stronger. Assess your situation, prioritize your expenses, create a new budget, and explore new income opportunities. Seek support and stay focused on your long-term goals. Remember, setbacks don’t define you—how you respond to them does.

Until next time, stay resilient, stay positive, and keep moving forward. You’ve got this!

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