Financial disaster can happen to anyone and in a myriad of ways. Unexpected job loss, divorce, and medical bills are common factors that lead to a crisis. But so is the simple accumulation of debt due to unwise decisions or bad habits.
So debts accumulate, the creditors come calling, the repossession/eviction/foreclosure happens. In a nightmare reversal of fortune, you’ve lost everything you have. You’re no longer facing financial disaster. You have scraps of the wreckage in a duffel bag.
So what do you do now? Is recovery even possible? The good news is: it is possible. The bad news is: it won’t be quick and easy. You couldn’t expect it would be outside of receiving a windfall inheritance. Barring that possibility, here are the steps of your action plan to recover from financial disaster.
Have A Good Cry
If you haven’t by now, you need to let yourself feel and express the pain of your loss. If you don’t, all your grief can spring up to sabotage you later. So have a loud, snotty cry over it. Throw a pity party. Talk it out, if only to a pigeon in the park. Process the unfairness, the stupidity, the arrogance. Take a whole day but no more because more time won’t help you. Move on.
Identify The Lessons
Financial disaster rarely happens overnight. You’ve seen it coming and been trying to battle back for a while. What did you learn in that time? Identify the mistakes that left you financially vulnerable, the decisions that were wrong, or the habits that led to your self-inflicted financial wound. Actually put pen to paper and make a list.
The purpose isn’t to beat yourself up. The purpose is to become clear about what you need to do differently. If you don’t know or admit the cause, you won’t apply the proper remedy and the next steps may be exercises in futility as you circle back to financial disaster again. (Statistics show an astounding 70% of winners of major lottery prizes go broke within 5 years. If you can’t handle a little money, you also can’t handle a lot.)
Assess Your Options
What is your best option for cheap housing while you rebuild? Depending on your stage of life, you may have parents or grown children willing to share their space with you for free or “family rate.” If you still have employment, you might be able to afford an apartment with a roommate. Sometimes, churches will provide vouchers for emergency, short-term motel housing and meals. You need to work out shelter and food. Pride is a luxury at this stage.
List Your Next Objectives
Depending on cause of your financial disaster, you may need employment, transportation, permanent disability, counseling, on-going medical treatment, bankruptcy lawyer, or a number of other things. List and prioritize them. Take action to address them.
It’s at this point some people find it easier to list the reasons they can’t do something and the obstacles they face. That’s not the list to make. This is a ‘Can Do” list, not a “Can’t Do” one. So if a job is what you need, it’s not productive to think of all the jobs you can’t get and all the reasons why. Focus only on what is feasible at the moment. You can get a better job as your situation improves.
Make The Necessary Mental Adjustment
Make the mental adjustment from panic-mode to purposeful, long-haul mode. At the minimum, think 2-3 years until you’re on solid footing. Your recovery is dependent on gathering emotional strength, a realistic mindset, and wisdom to avoid short-cut traps.If you find yourself considering a payday or title lender, punch yourself in the face instead. Click To TweetIf you find yourself considering a payday or title lender, punch yourself in the face instead. It will hurt a lot less. The same goes for credit repair services – which are notorious for fraud. There aren’t any quick fixes, but there are loads of “services” ready to take advantage of your vulnerability. Don’t be their putz.
Make A Budget
With whatever funds you have from employment, unemployment, public assistance, or private assistance, make a budget to live by and live by it. Making a budget (a plan for how you’re going to spend your money) is not difficult.
Determine your monthly income and subtract your monthly fixed and variable expenses as well as planned savings. Savings is what’s going to help you recover your financial health. If it’s not in the budget, it won’t happen. Tweak the variable expenses as needed to make income and expenses equal each other.
Find A Side Hustle
Unless you’re picked up as a walk-on by the New England Patriots, you’re likely going to need a second job. It may be you’ll need the income of a side hustle simply to make your budget balance. But even if you balance your budget, the quicker you can pay off debt and add to your savings, the better off you’ll be. And it will be a needed emotional lift to see those savings grow.
I have loads of ideas for side hustles and frugal living on this Pinterest board. Find ideas that work for you and follow the board for updated additions.
Don’t blow this step off. Living through a financial disaster pegs the Stress-O-Meter. Be kind to yourself and get some stress-relieving endorphins flowing through exercise. Do not buy a gym membership! A long, brisk walk will do the trick. If you can find someone’s dog to exercise for a few bucks, double benefit.
And pray while you walk. God already knows every detail of your situation so you don’t have to explain. God’s people sang the sweet comfort of Psalm 46:1 – “God is our refuge and strength, a very present help in trouble.” If you want to know if you’re included in “God’s people”, you can read the gospel message here. Your troubles may lead to great spiritual benefit.
You are not the first person to go through a life-altering financial disaster. And the stories of those who have gone before you and come out the other side, recovering and wiser, are encouraging and motivating. You can do it, too.