Did you have an unexpected event that left you dealing with a financial setback? Are you struggling to get caught back up but don’t know where to start? There are some steps that you can take right now that can help you bounce back from the situation.
Keep reading to learn more about how to recover from financial ruin and start living the good life again.
No matter what happened to get you into your current situation, whether you’ve lost your job or a natural disaster ruined your home, the first thing you have to do is give yourself time to grieve and then move into acceptance. It’s a devastating blow and will take some time but eventually, you have to accept what has happened and begin to take steps to recover financially.
Once you have accepted the fact that your life has changed, you can stop living in the past and start living in the present. This change of mindset will help you get your energy back and be able to start planning for the future.
2. Assess Your Situation
The next step to recover from your financial setback is to take inventory of where you are at with your current situation. This is the time to write down what type of resources you have, what types of liabilities you are facing, and start creating a plan to get out of this situation.
You can’t create a plan for the future if you don’t know where you are at in the present. Think of this as creating a roadmap to help you plot your route from where you are today to where you want to be a year, five years, or 25 years down the road.
Start by taking inventory of what remaining assets you own, how much money you owe vs. how much you spend, and what your credit score is right now. This will help you get a clear picture of what your financial recovery plan should be.
3. Create a Budget
Once you have a clear picture of your financial situation it is time to sit down and create a budget. This budget should outline what your income is and your required fixed expenses each month. These expenses include your mortgage or rent, insurance, utilities, and credit card bills.
Your budget should also include expenses that change from one month to the next such as gasoline, groceries, eating out, and entertainment. Once you have a clear idea of what your fixed and variable expenses are you will see how much money from your income you have leftover from your spending.
If you don’t have a lot of money leftover, then it is time to start cutting out expenses that are not really needed. You should consider where you can reduce your spending such as your cable bill, eating out or ordering in from restaurants, your gym membership you barely use, or even getting rid of your expensive car payment.
4. Start an Emergency Fund
Once you have created a budget and cut out unnecessary expenses it is time to start saving an emergency fund. An emergency fund is a savings account that you can turn to for unexpected expenses, such as a vet bill or home repair, instead of putting the bill on a credit card. The goal is to have at least $1000 in savings at all times.
When recovering from a financial disaster it may seem like you will never be able to save up the amount you need for your emergency fund but ideally, you can achieve this in as little as 90 days. One of the easiest ways to start saving is by having an automated amount from your paycheck go into your savings account. This way your savings account grows with minimal effort on your part.
At the end of the month, any extra money that you have leftover should be transferred into your savings account. Soon you will have your emergency fund saved up, which will reduce your overall stress, and you can move on to the next step.
5. Paying off Your Debt
Chances are you have accumulated some debts after experiencing your financial setback. Once you have your emergency fund in place, you can begin to focus on paying off your debts.
One of the most successful ways to do so is by using the snowball method. When using this method you start with the debt that has the lowest balance. Take the money you were putting towards your emergency fund plus your minimum payment and start dumping it into this debt. Once you have that debt paid off, you add that amount to the minimum payment of your next lowest balance and continue until everything is paid off.
The idea behind paying off the smallest to largest amount is you will see the progress being made and feel encouraged to continue. As the total amount you are paying each month towards each debt grows, the less time it will take you to pay off the bigger balances.
6. Extra Assistance
If you are struggling to get your emergency fund saved up, either because you don’t have very much income coming in or you can’t reduce your overall expenses, then you need to consider some other options.
In order to make some extra money, you should consider getting a side hustle. You could mow lawns, babysit on the weekends, clean houses, or even do freelance content writing online. All of these extra earnings should go into paying off your debt.
If you are in a tight spot and need some assistance much faster, there are several options for money loans that you can take advantage of as well. Just remember that this is a short term solution and add the loan into your snowball payoff plan.
Learn More About How to Recover From Financial Ruin Today!
When you have experienced a life event that sent you into financial ruin, it is easy to get stressed out. However, do not despair, with some careful planning and budgeting you can work your way out of the mess. Once you have your emergency loan saved up you can start working towards paying off your debt with less stress and the knowledge that you are making progress.
If you’d like some more financial tips and information be sure to visit our website daily!