Financial hardship can be triggered by a wide variety of situations. Perhaps you’ve been through a long and difficult divorce, or maybe you were laid off and lost your home to foreclosure before you found another job and regained your financial footing. You may even have made some personal mistakes by living beyond your means.
Whatever the reason, you can bounce back from hard times. Some of these methods are practical, while others call for a change in mindset and some self-forgiveness. In this blog, we go over four of the most effective steps to financial recovery.
1. Don’t be too hard on yourself
If you contributed somehow to your own financial difficulties, you may be blaming yourself. While accepting responsibility is a good sign, relentless self-blame is not. It can even lead to self-defeating behaviors like spending sprees or overindulgence in food or alcohol to numb the guilt.
Instead, focus on the future. Commit to making financially sound decisions from now on and leave the past behind.
2. Create a budget
A budget is a spending plan for your income. You know what comes in, what goes out, and how much you have left over. Many people unintentionally overspend because they don’t have a concrete overview of their financial transactions. Budgeting can help you avoid debt or tackle your existing debts in an organized manner that leaves you in control.
3. Build a rainy day and emergency fund
Although they sound similar, rainy day and emergency funds have different goals.
- With rainy day funds, you set aside a certain amount of money to prepare for an unexpected and urgent expense, such as a leaking roof or car repairs.
- Emergency funds are intended to cover your living expenses for three to six months if you lose your job or your income flow is otherwise affected.
Financial professionals recommend that you put away anywhere from $500 to $1,500 in a rainy day fund while your emergency fund will vary depending on how much you need for temporary economic security.
4. Don’t be afraid to undo mistakes
Did you unexpectedly fall back into old habits by buying a new Xbox or a designer handbag you can’t afford? Don’t be afraid to return them now and budget for a future purchase. These types of financial mistakes can usually be reversed, but if it’s not possible for some reason (e.g., you buy an item after seeing it on Craigslist and the original owner won’t take it back), acknowledge it as a temporary setback and resolve to avoid certain sites or stay away from the malls until you’re more confident.
By spending wisely and committing to saving for future uncertainties, you are on the road to overcoming past financial setbacks and getting back on track. At the Law Offices of B. David Sisson, we are committed to helping individuals and businesses across Oklahoma regain solvency after encountering tough times, either via bankruptcy or one of its alternatives. If we can assist you in any way, please contact us.