Financial setbacks come in all shapes and sizes. It can be an expensive household repair, a medical emergency, getting laid off or the birth of a baby. Whatever the situation, it’s impossible to plan for every financial hit you will take in your lifetime.
But don’t fret. If you’re hit with hard times, here’s some tips to keep in mind.
1.) Don’t panic
Keeping calm will allow you to think more clearly and resolve your deficit quicker. As difficult as things seem now, they’ll always look a little better after some levelheaded planning.
2.) Crunch the numbers
I’ll disappear if you just ignore me and pretend I don’t exist, said no problem – ever. That’s because problems won’t disappear when they’re ignored, especially not money problems. If anything, they snowball into a mountain of financial issues you really don’t want. So, difficult as it might be, sit down and figure out exactly how much more money you’ll need in order to cover your new expense, or to fill the gap of an income loss.
3.) Work twice as hard
The only ways for stretching a deficit to cover your needs are to either earn more or spend less. Since tightening your budget is almost always stressful, try finding ways to add to your income first. If possible, put in more hours at work. Consider freelancing or consulting. Take a side job for some extra cash. Do whatever it takes!
4.) Trim your spending
Now it’s time to see which expenses you can trim. First, you’ll need to prioritize. List all the expenses you cannot do without and those that would be irresponsible to neglect. Then, take an honest look at your remaining expenses to see where you can cut back.
Shop the sales to cut your grocery bill in half. Trim spontaneous purchases by only using cash. If you’re a two-car family, consider cutting back to one car for now. Push off your vacation plans until things start looking up.
5.) Contact your creditors
If you cannot make some of your minimum monthly payments anymore, contact your creditors before they come calling on you. Most creditors will be happy to work out a reasonable payment plan with you.
6.) Be proactive
Hindsight is always 20/20. Harness the urgency you feel now to get into the habit of building up an emergency fund. As soon as you’re back on your feet, start putting away money for protection in the event of future setbacks. Experts recommend having 3-6 months worth of living expenses saved up in case you can’t work for any reason.