Realistic Ways to Recover from a Financial Setback

Realistic Ways to Recover from a Financial SetbackIt 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

The Happy Homeowner

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, Good Housekeeping Magazine and many other outlets.
The Happy Homeowner

21 thoughts on “Realistic Ways to Recover from a Financial Setback

  • March 26, 2013 at 8:29 pm

    Great tips! I've experienced a lot of financial setbacks. The good news is getting through them makes you stronger and teaches you something for the next time. And if gives you the confidence to know you could go through something again and survive.
    My recent post I’m Breaking Up with my Hairdresser

    • March 27, 2013 at 10:08 am

      Absolutely! I've been in the same boat with lots of mistakes & setbacks but I'm stronger and much better prepared now because of what I've learned. Knowing you can ride out the tough times makes it that much easier/more motivating to kick some serious arse with the goals you set regardless of your overall situation!

  • March 27, 2013 at 10:02 am

    Great post. It's easy to forget the fundamentals when you're in crisis mode: trim the budget, work the cash reserve, and above all, try to stay away from the credit cards. Cool stuff!
    My recent post How Colors Affect Your Investment Decisions

    • March 27, 2013 at 10:10 am

      Thanks, Joe! Yeah, after you accept the situation and realize that it's back to the basics, you can really plow through anything. I think if the situation is already so challenging, why complicate it further? Stick to what's proven to work, keep plugging away and know that some day you'll be able to look back and smile at the progress you've made!

  • March 27, 2013 at 12:53 pm

    Recommitting yourself to a budget is the key I think. Following a budget immediately removes emotion from the equation, which is a good thing as you point out.
    My recent post Career Advice: Be An Entrepreneur

  • March 27, 2013 at 1:09 pm

    Good tips on a sensitive subject. I went to dental school for a semester, then realized I hated it. The financial cost was pretty discouraging, as was my lost time. But when one door closes, another opens – I was offered continual money to do a PhD in financial planning.

    Anyhow, my take-home is this – forget about the past, work hard, and keep your chin up. Good things are sure to follow
    My recent post Why We Can’t Afford a Dog

    • March 27, 2013 at 1:16 pm

      Thanks for sharing a bit of your story–happy to see that it all worked out for you. Your takeaways are extremely important–working hard and remaining positive can do so much!

    • March 27, 2013 at 3:23 pm

      Thanks! And yes, acceptance must precede all other steps before real change can be made!

  • March 27, 2013 at 6:39 pm

    Hmmm, I don't if I totally agree with "keep your emotions in check", but that may be a more personal thing. For me, it's easier for me to recover/make a plan if I let myself freak out for a few hours and vent to anyone that will listen. Usually that's when I get good advice from my peeps too :)
    And is it just me, or do these setbacks ALWAYS seem to be automobile related??
    My recent post Bank of America rejected my Mom’s Power of Attorney document

    • March 28, 2013 at 11:21 am

      I might not have worded that correctly–definitely go through the range and have the freak out, but don't let the emotions dictate your next steps. Good advice is key, too–I get that during/after freak outs, too :)

      I know what you mean about the car stuff! My old beast of a car was draining me!

  • March 27, 2013 at 10:28 pm

    I have nearly thrown in the towel when we were paying down debt and hit a road block. Took about a year to find our way back to where we should be. I'm glad that we stuck with it and made it through the tough times though because the rewards will be great.
    It's really important not to give up the fight.
    My recent post 2013 Saver’s Tax Credit: The Government Match

    • March 28, 2013 at 11:22 am

      Definitely! Thanks for sharing–happy you guys stuck with it, too. So much better in the end, eh? :)

  • April 7, 2013 at 2:45 pm

    "keep your emotions in check" is by far the most important thing you mentioned . You can't recover and rebuild if you aren't emotionally stable and rational, plus a bit optimistic =)


Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>