7 Tips for Taking Charge of Your Finances after a Setback

by Guest Contributor · 2 comments

We all make money mistakes. And even if we don’t make many financial missteps, the reality is that a disaster can unexpectedly set you back.

When you are suffering from a financial setback, it can seem as though everything is out of your control. How can you take charge of the situation?

Having gone through several financial setbacks myself as well as counseled dozens of clients through it, I get how tough it is. I know there were times when I wanted to quit. I even convinced myself that trying was pointless at times. Deep down though, I believed that things would eventually work out.

If you’re in the midst of a money struggle, you might be asking yourself if there is a way to get back control of your financial life.

Luckily, the answer is yes. The solution isn’t always easy, but it’s workable. Here are seven tips for taking charge of your finances after a setback:

1. Honestly Evaluate Your Situation
Your first step is to honestly consider your situation. How bad is it? Tote up the debt and consider your sources of income. It’s not fun to look at the numbers and it can be overwhelming, but it’s important to face the realities of your situation. You need to know what you’re up against so that you can make an appropriate plan of attack.

When I was in college I convinced myself that I was doing “okay”. The reality was that I had charged over $10,000 on credit cards and accumulated almost $20,000 of debt. Many might think that amount isn’t “that bad” but the sad truth was that I was in the military so my schooling was paid for. I had no reason to take out student loans and definitely no excuse to run up my credit.

I became dishonest with myself and allowed my situation to get out of control. Thankfully, I got my butt in gear and now I’m much more honest in how I spend my money.

2. Learn from Your Setbacks
How did you get here? In some cases, you might have lost a job or experienced a medical emergency. Be honest about that and be honest about what you might have done differently. Could you have had a bigger emergency fund? Would better networking before your job loss allowed you to connect with better opportunities faster? If you have a lot of consumer debt, take a look at your spending habits and pinpoint behaviors that need to be changed.

While a setback might not be entirely your fault, the reality is that every misfortune has some sort of lesson attached to it. Look for the lesson so that you can proceed in a healthier fashion.

3. Stop Digging the Hole
Be careful not to make the situation worse. If you are in debt, the first thing you need to do is stop the debt spending. You need to stop digging the hole. If you are in trouble due to other factors, don’t make it worse by ignoring bills or turning to a shady credit counselor.

Instead, talk to your creditors about options and look for help from accredited professionals who won’t trap you into long-term deals or charge outrageous fees. Debt coaches can be a huge help, so as long as you choose the right one.

4. Create a Plan of Attack
Now that you know where you stand and what needs to be done, you can create a plan of attack. Think of your end result as a mission. List all of the things you can do to improve your situation. If you are looking for a new job, you can update your resume, get interview coaching, and do a little networking.

If you have a lot of credit card debt, you can create a debt pay down plan based on the principles found with the debt snowball or the debt avalanche.

Every mission goes better when there’s a plan, and if you have a plan to overcome your financial setback, you will be in a better position to succeed.

5. Cut Back on Unnecessary Spending
Honestly evaluate your spending. How much of it is unnecessary? Find ways to cut back on your spending (your plan of attack can help you with this). From refinancing your mortgage so you pay less each month to creating a meal plan so you don’t eat out as much, there are a number of actions you can take to cut back.

The biggest way I was able to cut back my spending early on was by driving a 1998 Chevy Lumina for several years into my career. There was no way hiding the fact that it was totally a grandma’s car (4 doors, champagne colored) but it was totally paid for and had less than 18,000 miles.

By driving that car for several years, I was able to invest like a champ while my friends were sinking their paychecks into their unnecessary new car payments.

6. Look for Ways to Earn More
There’s only so much you can cut from spending. Don’t forget that you might also need to earn more if you want to take charge of your finances. Earning more can also ensure that you aren’t too dependent on any single source of income – and that’s huge.

You can sell your stuff on eBay, take a part-time job, or start a side hustle. Find ways to earn more money and you’ll be amazed at how quickly you can turn things around.

7. Get Help
If you are struggling, don’t forget to look for help. Whether you just need a little support from your loved ones or whether you feel like a full-blown financial plan is necessary, recognize the help you might need. A little help can go a long way as you get back on your feet.

It’s never fun to experience a financial setback, but you don’t have to remain the victim. You can take charge of your financial situation and move forward.

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  • Arminius Aurelius says:

    I spent 4 years in the Navy after graduating from High School . I had the government deduct 20 % of my monthly salary and put it into government bonds . After the Navy I wanted to travel to Europe and bicycle thru Europe for 3 months . But , I did not want to touch my savings . So I worked 40 hours a week plus an extra 4 hours a day [ 20 hours a week ] for 8 or 9 months . The extra salary paid for my trip. Did not have to touch my savings . I did that a number of times when I was young . In 1969 I decided to go into business and bought bankrupt restaurants . 4 out of the 5 restaurants I bought were bankrupt . In every case I succeeded beyond my wildest dreams . But again I worked 12 hours a day, 6 days a week to oversee my employees to make sure they were doing their job . After 34 years in business I found that a high percentage of employees put in minimal effort . It seems they started at the bottom and were happy there. It is a known fact that about 70 % of the lumpen masses spend , spend , spend in order to live the ” good life “, go into debt and willingly pay 18 % to 20 % interest on their debt …… and save little or nothing for their retirement [ 20 or 25 years ] and then live like poor White / Black trash. [ 1/4 of your life ]
    ” A Fool and his money are soon parted “

  • Janine says:

    For me, it is always most important to have an honest look at my finances. Whether I’m doing well or struggling at the moment, if I always know exactly where I’m at there are typically no big surprises that are likely to pop up. If you are just coming out of a set back, it’s extremely important to learn from your mistakes as well. Like you said, take a look at what you’ve been doing and see what worked and what didn’t and what you will do to change that in the future. And remember – your set back does not have to be permanent!

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