Realistic Ways to Recover from a Financial Setback

Realistic Ways to Recover from a Financial Setback It can happen to any of us: One month you’re plugging along with your various financial goals and the next you’re slammed with an unexpected expense that derails everything. Whether it’s an accident, illness, layoff, divorce, bankruptcy or even coming to terms with a pile of debt, there are many ways life can deal us a hand that forces us to scramble in order to cover the bills we once paid so easily.

If you’re struggling through a hard time or are trying to find your footing after a setback, take comfort in knowing you’re not alone: Financial setbacks happen to everyone.

Personally, I know this all too well as I can easily pinpoint some of my worst experiences and the periods of time when I had no clue how to properly manage my money. Fortunately, in the process of cleaning up my past money messes, I learned from my mistakes. I also learned that while the path to/from financial ruin isn’t always an easy one to navigate, it’s well worn from those who have been faced similar challenges.

Here are a few realistic ways to recover when you’re faced with your own financial setback. Each of these steps has helped me tremendously in the past, and together they are the first course of action I’ll take if/when I’m faced with obstacles in the future.

Accept the Situation for What it is

The cold reality is that there’s no way to actually move forward from a setback until you fully accept the situation for what it is–living in denial will only complicate matters further. Realizing you’re in a rough spot or that you can’t make ends meet due to a situation that’s out of your control can be devastating.

Yes, it might not be fair. Yes, it’s a bummer to have to accept that you have financial constraints that limit you from living how you’d like to live. But at the end of the day, what’s done is done–you can’t rewind; you can’t turn back.

While your acceptance of the situation is the first step in getting back on solid ground, it also needs to be coupled with the realization that there isn’t a magic wand that’s going to instantly fix things. It could very likely take you years to recover. Instead of wallowing, get yourself right back on track to move forward but realize you might have a long, uphill battle ahead.

Keep Your Emotions in Check

Once you’ve accepted the reality you’re now living with, it can be easy to let your emotions wreak havoc on your ability to move forward. The feelings of stress and worry you’re feeling shouldn’t be ignored–they can be used as a catalyst for change.

Rather than avoiding how you’re feeling, face it head on as you accept your situation. It’s important to allow yourself to feel a full range of emotions, but that doesn’t mean your emotions should dictate your decisions. Give your best effort to make clear, level-headed choices as much as possible.

Dust off Your Budget

For some, budget is a four-letter word that sends chills down their spine. In reality, a budget is simply a tool that can help you manage your money better. Having a budget will help you to figure out where your money is coming from, where it’s going and how you can make small changes that will add up big in the end.

When setting up your new budget, remember that it’s about prioritizing your needs rather than your wants. As you list all the ways your money flows in and out in the month, take care to be specific and to pay attention to the details. Identify ways you can cut back and be prepared to make some serious sacrifices.

Identify Tangible, Reachable Goals

After wrangling your emotions and creating a budget, it’s time to set some goals. Remember that these goals need to be clear, concise and realistic–they aren’t a vague idea of something you hope to accomplish.

As you begin to identify your goals, be careful not to set too many. Start small and focus on the little wins in order to boost your motivation and confidence. By taking it step by step, you’ll be less likely to burn out or feel overwhelmed.

Make a Commitment to Yourself

At the end of the day, you’re the only person that can truly make the necessary changes to get yourself back on track after experiencing a financial setback. And while setting goals and creating budgets are a great way to kick-start your efforts, they’re meaningless unless you commit to the hard work ahead of you.

Take Action

Your plan for financial recovery requires one last, most important step: Taking action. Your goals are worthless if there’s no action taken to meet them. Action is the catalyst for how you can turn your goals into results. You can dream of a better situation all you want, but it won’t become a reality unless you work hard–consistently!

By taking direct action toward meeting your goals, you’re setting yourself up for future success and opening a world of opportunity that can be hard to see when things seem so bleak.

Don’t Give Up the Fight

Throughout all of the steps listed above, there’s one crucial component that can make or break your progress: Resolving to never give up.

No matter how long it takes to change your situation and no matter how many sacrifices you make, challenges you overcome and difficulties you endure, keep moving forward. Remember that baby steps are better than no steps at all.

Develop a consistent, habitual process and you’ll also establish sound financial habits along the way. Those habits will be life-changing as they’ll help you through any future setbacks just as much as they do this current season of growth.

No matter what life may throw your way, just keep moving forward.


How have you handled financial setbacks?


Photo credit: flotographic arts

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The Happy Homeowner

We're a team of freelancers who are on a mission to inspire others to live a healthy, balanced life one cent at a time. Work from The Happy Homeowner has been featured on CNN Money, Yahoo! Finance, Wisebread, Lifehacker, The Dr. Oz Show, and many other outlets.

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