When you need to recover from a financial setback, the process can feel daunting. Where do you start? What changes must be made to rectify the situation? How long will it take? If you’re not sure how to create a plan, follow these steps to get yourself back on track.
The first and best step for recovery is to take a deep breath. Accept the challenge you face and commit to fixing it. Being anxious in these situations does no good and beating yourself up for past decisions won’t help either.
When you’re clear-headed, you can be pragmatic about your approach to a solution. It also helps to remember that recovering from a financial setback can take time. Don’t become overwhelmed when your efforts don’t immediately make huge impacts. Even small improvements over time will add up to a positive outcome.
Understand the Scope of Your Financial Challenges
Once you’re in the right frame of mind, it’s time to evaluate your financial setback. Assess how you got to this point. Was this a one-time misjudgment that resulted in financial loss? Is this a pattern of poor spending habits? Or is the setback due to something out of your control? Maybe it’s a combination, but the important part is understanding the root cause so you can make the right plan to fix it.
Next, answer the following to help you create a roadmap for moving forward:
- What other assets and income do you have?
- What is the total amount of debt you owe?
- What are your expenses and where can you cut them down?
- Do you have non-negotiable financial obligations (e.g., child support, tax lien, alimony, etc.)?
- What is your credit score?
This information clearly defines what you have to work with as you make your plan to recover from a financial setback.
Define Your Goal and Create a Recovery Plan
Now that you know where you are, it’s time to identify where you want to end up. Then it’s just a matter of planning the steps to get from point A to point B. Make sure your goal to recover from a financial setback is realistic. Is it recouping a certain amount of money back into your savings account? Is it paying down debt you have racked up? Whatever your objective is, break it up into even smaller achievable goals, track your progress along the way, and most importantly, give yourself a reasonable deadline.
As part of your financial recovery plan, you may consider borrowing from existing assets like your retirement account or emergency fund. Tapping into available credit to cover expenses or lower your overall monthly payments is another option. Take heed though: if the goal is long-term financial viability, it’s wise to speak to an expert before making these money moves. A financial advisor can discuss your options, help you devise a realistic, financially sound plan, and teach you how to track your success.
Put Your Financial Recovery Plan into Action and Make Adjustments Accordingly
When you’re trying to recover from a financial setback, sometimes the hardest step is the first one. Taking the time to assess your situation, identify your goals, and make a plan to overcome your challenges is great, but actually taking action on that plan can be scary – especially if it means changing your behavior or something else about your current lifestyle.
You may feel hesitant or overwhelmed by the idea of putting your plan in motion. Our advice: just do it. Once you experience what it’s like to work toward your goal, and you hit those first few small wins along your roadmap, you’ll gain the confidence and motivation to keep pushing forward.
Keep in mind that plans don’t always go perfectly. That’s why it’s so important to measure your progress. If something isn’t working, you can adjust your efforts to ensure you keep making headway. As long as you’re moving in the right direction, you’ll eventually realize you CAN recover from a financial setback. The empowerment you feel when you finally reach your goal is unlike any other.
Remember, you don’t have to go through this alone. Your Credit Union is here to support your financial life. Let us help you address the challenges of the present and create a plan for a better tomorrow.