Financial problems can arise at any time. Hurricane Sandy. The housing bubble (and bust). Divorce. Cancer. Enron. What do all of those things have in common? They – and plenty of other triggers like them – have been the causes of financial setbacks and problems in the lives of many. Financial setbacks, by their very nature, are unpredictable. Even if you had a protection plan in place – homeowners and flood insurance before Sandy, health insurance before a cancer diagnosis – you may, as Carolyn found, have ground to make up in order to regain your financial fitness. But how do you do it?
Figure out where you are. Not where you were. Or where you were headed. But where you are right now. What are you earning, how much do you owe, what do you own? Then look at how long the situation you’re in is likely to linger. Is this an on-going financial problem that will result in a reduced income for months if not years into the future? Or is this a one-time event from which you’ll be able to steadily rebuild?
Cut spending. Take a good look at your living expenses with an eye toward figuring out what’s necessary and what can go. If you have assets of value (jewelry, art, an extra car) that have been sitting around unused, now may be a good time to try to convert them to extra cash. And, if you don’t have the ability to pay all of your bills, strategize so that those most important obligations (typically secured debts like the mortgage and car loan that can be taken from you) get met first.Don’t hide from your creditors. Pick up the phone, tell them what’s going on in your life, and ask how they can help.
Protect your health. There is nothing that sends more people into bankruptcy – a true financial setback – than a situation involving your health. What that says to me is that if you lose your healthcare coverage because you lose your job, or if it becomes unaffordable from your current provider, you need to do whatever it takes to replace that coverage. Using COBRA provisions to extend your workplace coverage is likely an option – but may be pricey. If the cost is too great, look into buying a high deductible policy through ehealthinsurance.com.
Keep moving forward. A financial setback is just that – a setback. Although it can carry a large amount of both shame and guilt, it’s important to remember it is not a life sentence. Think about what got you into the precarious position in the first place (if indeed, it was something under your control). Make changes in your life so that it doesn’t happen again. And then start putting one foot in front of the other. One thing that can help you feel better: Saving money, even if it’s a small amount. Seeing your savings start to grow will, over time, help you regain your feelings of power, independence and self-worth.