RECOVERING FROM A FINANCIAL SETBACK

WE ALL HAVE FINANCIAL SETBACKS

Financial setbacks can have varying degrees of impact on your financial situation. No matter the severity of the setback, they can affect our momentum to keep moving forward. When you are working so hard to make progress on financial goals it really hurts when things go wrong and take away what could be anything from weeks to years of progress. It takes some effort to help in recovering from a financial setback.

No matter how large of a setback you experience, it is so important not to let it make you give up. Even if you were hit really hard by the setback, you will never be better off by giving up. The worse the situation is, the more important it will be to stay focused and get yourself back on track. Back on track may not be what it was before, but it will always be much better than what you will get if you give up out of frustration.

TAKE TIME TO GET YOUR THOUGHTS TOGETHER

If you have a significant financial setback, your initial reaction will likely be driven by emotion. It’s very discouraging when you work so hard to get ahead and something happens to wipe out so much of your progress. Unfortunately, most of us will have some of these financial setbacks over the course of our life. If you react immediately when you are still very emotional about the situation, you may not make the best decisions. Try to give yourself time to really think about the situation.

Was the situation caused by actions you took?  If so, of course, you will have to take responsibility.  But focus on what to do differently going forward.  It’s not worth wasting time wishing you had done things differently.  It is not possible to go back, so set yourself up for success by changing things going forward.

Was your situation caused by something you had no control over?  Maybe a medical event, or a car accident that you did not cause? Don’t let the unfortunate situation put you in a negative mindset that will discourage you from recovering from a financial setback.

PRACTICE GRATITUDE

Practicing gratitude can be so helpful in getting through many situations. Remind yourself of all of the things you have to be grateful for. If you have a place to live, vehicle for transportation, clothes to wear, food to eat, nature to enjoy, family, friends and many more things that I am sure you can think of to be grateful for. Being grateful helps build a good mindset to be positive about turning your situation around. It also often helps you to avoid spending money that you don’t have. When you appreciate what you have you are not as likely to feel the need to purchase new things.

RE-ESTABLISH YOUR BUDGET AND FINANCIAL GOALS

When we have been following a plan for some period of time and something happens to completely throw us off the plan, it can be really hard to let go. If you have been tweaking and tracking and really doing everything you can to stay on track, you don’t want to have to scrap it. We can become attached to these plans, and feel like we have failed if we don’t see them all the way through.

If something unforeseen happens that makes your current plan unachievable, it is not that you failed. You just had an unfortunate situation happen, which happens in life. How you will be much more likely to fail, is if you try to hang on to an unrealistic plan that you will never be able to stick to.

Unless you had a relatively minor setback, it is very difficult to catch up and get back on track with your old plan. It’s discouraging to constantly be in a catch-up mode. Instead of trying to play catch up, re-establish a new budget based on where you are today.

BE REALISTIC ABOUT WHAT CAN BE DONE

It’s important to set realistic expectations for your revised financial plan. If it took you two years to fully fund your emergency fund, you will not likely be able to rebuild it in 6 months if your situation caused the fund to be depleted. More likely than not, it’s going to take time to recover the ground that you lost. Recovering from a financial setback is difficult. By looking at where you are at and what you can realistically accomplish, you will be able to set achievable goals.

TAKE SMALL STEPS IF YOU NEED TO

Depending on how large of a hurdle you need to recover from, you may need to take it slow. It’s better to be making small steps moving forward then just getting stuck in a place where you are making no progress. Figure out where you can make a small impact. Is it focusing on re-building your emergency fund? Getting your spending back on track? Cooking from home more? Whatever it is, it’s ok to start small.  Small wins give you encouragement to keep moving forward!

Thanks so much for checking in! If you would like to hear the podcast version of this topic to check out Lola’s Frugal Life Podcast! Also, be sure to check out my other blog posts on this site!