Experiencing setbacks is part and parcel of life and it’s no different when it comes to our finances. Be it a major financial setback like a layoff or a minor setback like an unexpected car repair, both can hit us emotionally and psychologically if you’re not financially well-prepared. If you find yourself dealing with any financial setback, consider following these steps below to get you back on track.
Having an emergency fund worth at least 6 months of your expenses will be a big help during this dire time. But what if your savings is not enough to get you back on track? Before you start the road to recovery, get a clear view of where you stand financially. Consider asking yourself these questions:
It is crucial to have a clear understanding of your current financial situation. Answering these questions could help you in creating a plan to reach your financial goals.
Once you’ve figured out your situation, then it’s about time for you to determine where you want to go financially. Do you want to pay off all of those debts? Are you going to pursue your early retirement dream? No matter what you want to achieve, make sure to write all the goals down. Having goals in mind helps you to stay focused and confident. You can try using the SMART goal-setting to help you set your financial goals. SMART stands for:
S – Specific
Put a number to it, calculate how much you are looking at exactly. Setting a specific goal such as ‘Retiring with $1,000,000 in my bank account’ or ‘saving $1,000 monthly’ is better than just ‘retiring with a lot of money’ or ‘save some money monthly’.
M – Measurable
Make sure it’s measurable so you can track if you are actually progressing.
A – Attainable
If you don’t think it’s attainable, do not set yourself up for failure.
R – Realistic
Which brings us to this point, be realistic about it.
T – Timely
And what’s your deadline? How long do you have to reach your goals?
Keep in mind not to be too ambitious when setting your goals. After all, you still need to live in the present while you are working for your future. That’s why it’s important to set realistic goals – goals that you can achieve.
Don’t set yourself up for failure even before you start.
If you fail to plan, you are planning to failBenjamin Franklin
Having a set of goals only is not enough until you create a plan to achieve it. If your financial setback includes outstanding debt, then you need to make a plan to pay it off, either through earning more or saving more. A plan will act as a link to connect where you are today to where you want to be in the future.
When creating a plan, you should decide what specific changes you’re going to make and what are the things you should prioritise. Don’t forget to expect the unexpected. The plan should also be able to minimise the chance of another financial setback that could hit you ahead. With a plan in mind, you will less likely to fall off your financial track.
Your financial recovery plan is nothing more than well, a plan until it is transformed into action. Now it’s the time for you to pick up the pieces of your financial setback and move forward. That could also be the toughest part.
Developing a plan is easy until it’s time for you to take action and stick to it. Taking action also means that there will be certain sacrifices involved. You will need to work more, tighten your budget, or even downsize your lifestyle. It sounds hard but remember that all these changes are temporary. The more you ‘re willing to sacrifice, the quicker you’ll get back on track.
As you work out the plan, there may be times when you fall off the track or perhaps some part of the plan begins to seem irrelevant. This is where you should make room for adjustments.
If you think the strategy could no longer work, take a look at certain aspects and determine what needs to be changed to meet your current/future needs. In other words, if something happens outside what you have planned, take a step back and reevaluate your options.
Make necessary adjustments where appropriate, and don’t let setbacks, set you back.
Note that a setback is never the end. It’s just a bump on the road. Recovering from a financial setback takes a lot of hard work. If you find it tough, a professional financial advisor can offer you valuable advice on how to get back on track. Acknowledge the loss for what it is and move on. You may lose some today, but one thing for sure, you will come back stronger tomorrow.
Prefer to read on the go? Download SyncWealth now and gain access to our wealth of financial articles and tips – anytime, anywhere.
Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page.