A financial setback can happen to you without much warning, and you may not be prepared or have the resources to deal with it. This can leave you in a difficult position as you attempt to recover from the setback. Even when you lack the financial resources to recover from a financial emergency, there are steps you can take to gradually improve your situation.
Determine How the Setback Occurred
Some financial setbacks occur suddenly as the result of a serious accident or the diagnosis of a severe illness. Other times, the setback might be caused by a series of events that adversely affect your finances. You might have moved to a new city without having a job waiting for you, or you might have filed for divorce without considering the financial repercussions. Knowing how the setback occurred will help you modify your habits to ensure other preventable setbacks won’t occur in the future.
Start Trimming Your Spending Habits
The next step in recovering from a financial setback is to start saving as much money as possible from each pay period. This will involve cutting your spending on variable expenses. Some expenses, such as your rent or mortgage payment, will remain the same, but other expenses can be affected by lifestyle changes. Take steps to reduce your home’s daily energy usage. Buy generic and low-cost groceries, focusing on foods that will make several meals. Cut unnecessary subscriptions, such as subscriptions to multiple streaming services. Look for other unnecessary expenses that can be reduced or altogether eliminated.
Increase Your Monthly Income
This is a good time to explore other options for earning income. If you have a hobby or talent that you have always wanted to turn into a profession, this is the best time to try it. The availability of remote work, freelancing, and entrepreneurship has never been greater. You can also look for flexible part-time jobs that will help you bring in a little extra income. Be sure you save the extra income you do earn.
You can mitigate future financial setbacks by anticipating them and creating a proactive response plan. This should include building up a savings account that will be reserved for financial emergencies. Even if you only save 10% of your earnings from each pay period, this can help you build a substantial emergency fund over time.