How to recover from a financial setback
If this year has taught us anything, it’s that financial setbacks or stress can happen, even with the best laid plans and intentions. We can’t always predict certain life events, such as a marriage breakdown, job loss, ill health or personal injury, which can all quickly derail your financial goals or leave you struggling.
It can be hard not to feel overwhelmed when the bills continue to come in and you are getting further and further away from your goals. However difficult it may be, it‘s important to address the situation as early as you can, make sure you know your options and begin to take the steps to take back control.
Here are seven steps you can take if you need to get your finances back on track:
1. Identify your financial stress.
Assess your situation and be both honest and realistic with yourself. There is no benefit in hiding from the problem or putting it off, as this will only lead to more long-term pain. Take the time to sit down and obtain a good understanding of your real financial situation.
2. Put a plan in place.
Write down your short and long-term goals as a way to focus on the positives and set your sights on the future. If you have a budget already, go over it and look for ways you can reduce spending or redirect funds towards repayments.
3. Call on the experts.
Sometimes you need to talk to a professional. Finances can be overwhelming and when you don’t feel in control, financial advisers and accountants may be able to give you guidance and talk to you about the options available to you. They can help you to get your current situation under control, as well as set goals for the future.
4. Get your paperwork in order.
From your budget to your bills, simply taking the time to get organised can improve the overall management of your personal finances and put you in control. It will also give you the chance to find and refer to things easily and make sure nothing slips through the cracks.
5. Know your options.
If you find yourself struggling to meet minimum repayments or have overdue bills you simply can’t pay, get in touch with your creditors as soon as you can. The sooner you do this the better, that way you’ll know your payment options before they become limited.
6. Put a buffer in place.
As soon as practical, set up an emergency buffer fund and make regular contributions to it. This is a savings amount you set aside to help you if something unexpected occurs, whether a job loss, a medical emergency, or a costly home or car repair.
7. Be insured.
Insurance is intended as a safety net and is there to help you during these unexpected events. Check that you have an appropriate level of car, health, home and contents cover, as well as personal insurances such as life insurance and income protection.
It’s important that when faced with a stressful situation you remember to take care of your physical and mental health. This could involve setting aside some time to yourself to do something you find relaxing or catching up with friends or family. And don’t underestimate the importance of a healthy diet and exercise routine to boost your wellbeing.
Financial stress or setbacks may be difficult and uncomfortable, but they can happen to anyone. By taking a logical and realistic approach to improve your situation you can get your finances back on track.