Money management is something some of us are learning the hard way. But even with best-made financial plans, unexpected and inevitable life events such as high medical expenses, misguided loans, layoffs etc, can throw you off course.
It is crucial for you to make a financial plan but of more importance is a recovery plan for any setback that you might find yourself in. Here are some key elements of a sound recovery plan.
1. Get clear on your setback’s implication
First of all, the thoughts and worries of how you will handle this setback are natural but not at all helpful.
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Get over the shock and try to assess the situation that is straining your finances to know exactly what you are dealing with. Your situation can be permanent or temporary, a one-time thing or an ongoing problem. By assessing the entire situation, you will get the actual figures and cost of your setback to help you plan ahead rather than moving on blindly with fingers crossed.
2. Consult a professional
When money woes strike, even the most composed employees feel deflated. Seek professional advice to put things in perspective.
A financial advisor can level up any exaggerations or underestimates that may cloud your judgment.
3. Consider your available financial resources
Analyse the financial options available to you that could bail you out of the setback. It could be your savings, insurance or an emergency fund.
Selling your investments should be the last resort when shopping around for loans from friends, relatives and even financial institutions seems not to bear fruit. If you have to sell your assets, allocate some amount to another investment as you sort out your present setback.
4. Prioritise your essentials
When you are struggling to get back on your feet, do not waste your efforts by over indulging in unnecessary items. Make an effort to stay grounded on your needs and keep wants at bay.
Tame your desires. You can always go back to them once you get fully back on track. Review your budget and cut back on luxuries. Do not be tempted to strike off insurance; the impact could bring you to your knees in future.
5. Beware of your emotions
Major financial changes can have devastating and overwhelming emotional issues on you and your family. The emotional impact is of great import compared to any loss in cash. Feelings of anger, frustrations, embarrassment could be an everyday affair. Sometimes you may even beat yourself up and blame yourself for it. Cut yourself some slack because financial setbacks are part of life.
Business coaches with Forbes magazine advice that anyone facing a financial setback should embrace the fact that it takes a while to recover. Accept help from family members and lenders to get back on your feet. Find your support system and avoid unhealthy coping habits like stress eating and wallowing in self-pity.
6. Talk to your creditors
Financial constraints may render some bills absolutely impossible to commit to even the minimum payment. Reach out to your creditors and come up with a more workable payment option. The earlier you do this, the easier it will be to fix a more advantageous solution to your situation.
7. Create a new vision
Depending on how severe your financial setback is, it is wise to create a new vision based on your current financial resources. Accept your reality and involve your spouse as you come up with new financial goals and work your way up again.
8. Correct and adjust
Your money management skills will definitely improve from such an experience. Employ a reasonably intelligent approach to plan your finances. Execute your new vision. Accommodate the changes and incorporate them into your wealth creation plan.
9. Perform periodic check-ins
Review your financial plan regularly to notice worrisome issues early enough. Tweak your investments to fit any new circumstances that may arise. As you approach retirement, re-balance your portfolio so that you do not fall too deep into risky investments.
Must know financial truths
“Your ability to earn money is ultimately what allows you to build wealth. Your financial life will completely stall if you can’t earn income.” Laura Adams. Whatever your financial woes be, you must always focus on bringing in more from your day-to-day activities. That is why we have side gigs, on consultancy jobs to maximise our income in the time allocated to work. Always pay yourself first. This means that you should save and invest more before you spend or pay anyone else. Get over previous bad investments; they are all in the past.
Teach your children about money. Instill good money habits in your children from an early age. This will set them up for a lifetime of wealth and success and ease the stress of high cost of quality education for them as you retire.