When it comes to coping with financial loss, there are no clear-cut rules. But there are a few things that can help—if you’re willing to try them. We’ve compiled the best advice from experts and survivors on how best to deal with a financial setback.
1. Take a moment to process your feelings in a healthy way
When something bad happens in life, even if it’s not financial, we have a tendency to overreact. Catastrophising a situation doesn’t help at all, and your energy is much better focused on more positive things.
With any financial loss, it’s natural to feel disappointed. In fact, you’ll go through a range of emotions include disappointed, anger, fear, and more. But it’s important not to let the loss consume you. Take some time for yourself and begin to accept what’s happened.
Whether you rely on or confide in friends and family is totally up to you. Often, it’s best to process your feelings by yours first, otherwise, you’ll be bombarded with well wishes and offers of help. These things are great, of course, but they can also be overwhelming while you come to terms with your financial loss.
2. Step away from the situation
When you suffer a financial loss, ignoring the situation is not the solution. However, at least in the short term, you do need to step away from it for a short while. There are no doubt other things in your life that need attention, such as work, family, friends, and other responsibilities.
When something goes wrong, it’s natural to want to fix it immediately. But when it comes to a financial loss, you can’t change what’s happened. So, take some time to focus on the other things that matter in your life.
Not only does this give you some room to breathe, but you avoid creating more stress for yourself. Even if you can’t instantly solve your financial problem, you can make sure the rest of your life is in order.
3. Reassess your personal budget
After any financial loss, it’s likely you’ll need to tighten up your spending for a period of time. This is where budgeting becomes so crucial. Everybody has a different method for creating a budget, but this brief plan is a good way to go.
- List everything you spend money on throughout the year
- Break these expenses up to match your pay/income cycle
- This shows you exactly how much you need to cover your expenses each week or fortnight
- Look at your list and decide if there are any expenses you can get rid of
- Depending on your income vs expenses, you can now see how much you should have left after putting money aside for essential bills
This won’t solve everything, but it helps to see everything in black and white. It also shows how much you can realistically spend on other things such as entertainment, groceries, and all other non-fixed expenses.
4. Reduce your expenses
Once you’ve got a clearer picture of your expenses, it’s time to consider whether you can reduce those costs. There are numerous ways to do this. Firstly, look at all the services you pay for such as mobile phones, insurance, and internet connections. There are some great ways to compare NBN plans in Australia, for example, to make sure you’re getting the best deal. You can do this with almost all the services you pay for each month. If you can save money by changing providers, go for it.
Also, look for non-essential items in your budget. Do you pay for a gym membership that you don’t use enough? While your physical health is important when dealing with stress, perhaps you can commit to going for a run outside instead of paying for the gym.
Everybody’s lifestyle is different, but there are always ways to reduce some of your spendings if you need to.
5. Learn from what went wrong
While learning from mistakes is important, you shouldn’t dwell on them. Rather, use them as motivation to come back better than ever. The key is to determine what exactly went wrong. Assigning blame, or being too hard on yourself isn’t helpful. But you do need to be realistic about what happened.
If you lost money as a result of gambling, for example, you need to be honest with yourself that the loss was avoidable if you didn’t gamble in the first place. If you were swindled out of money, think about how you can avoid being too trusting with money in the future.
If your financial loss was due to a business pursuit, analyze everything carefully. Just because it didn’t work this time, it doesn’t mean you’re a failure or you can’t be successful in the future. In fact, most successful (and wealthy) people tried and failed plenty of times before getting it right. So, break down the reasons for your financial loss, and move forward without dwelling on it.
6. Avoid comparing yourself to others
It’s easy to compare yourself to other people, especially if they’ve overcome similar situations. But you need to focus on your own situation and how to handle it in your own way. Remember that everyone deals with financial loss differently, so there’s no right or wrong way of doing things. Focus on what you can do to make things better for yourself because ultimately that will be the only way out of trouble.
With that being said, it’s always worth being open to a piece of advice from people who have successfully navigated a financial loss. Just make sure you don’t beat yourself up if you take longer to turn things around. Everybody has a different situation and differing levels of assistance available to them.
7. Get help if you need it
The next step is to ask for help when you need it. It’s never enjoyable to ask for financial help, especially from family or friends. But sometimes it is simply unavoidable and those who care about you will be happy to help where they can.
There are also many financial services, government assistance, and other organizations that can help if you find yourself in a significant financial hole. There are also banks and lenders who may be able to give you a loan.
As s disclaimer though, before you ask for any type of help, it’s important that you’ve done your budgeting. This means you can commit to a repayment plan with whoever you borrow money from. Plus, you’ll feel a lot better asking for a bit of help if you can show that you’ve already made changes to avoid financial mistakes in the future.
Even something as extreme as bankruptcy can be a blessing for some people. It’s never a desirable outcome, but with strong willpower, a serious financial loss can actually change your relationship with money for the better.
8. Make a list of priorities to focus on
The reality is, when climbing back from a financial loss, you can’t do everything at once. This is why we suggested stepping away from the issue to get some perspective. Your major needs are things like food and shelter. You need those things to survive, and as such should be your major priorities.
Second, list the desirable things in life. While you save money again, is it really important whether you have expensive groceries or cheaper alternatives? Can you get better value on your health insurance? Can you reduce car usage for a while and save money on petrol? There are so many things in life that we consider ‘essential’, but in reality, they may not be.
Finally, prioritize the things you need to do in order to get out of financial difficulty. List them in order, and don’t be afraid to include long-term goals. Ideas could be something like finding a second job, finding a better job, paying creditors, or even selling some belongings that you no longer need. When you have a plan, everything feels easier.
9. Find reliable sources of income
It might sound pretty obvious, but ensuring you have a reliable source of income is important. Many financial losses occur because you lose a job or a business fails. In that case, you need to replace your income as soon as possible to ensure you can cover your basic needs.
You may need to take a second job for a period of time, which is completely fine. Do what you need to do to ensure a reliable source of income while you get back on your feet. Remember, it’s not forever, but a steady income will take away some of your stress.
10. Look after yourself
Finally, you need to ensure you look after yourself. It’s easy to put your head in the sand, but that won’t get you anywhere. Even after a financial loss, you still need to have a life. Enjoy time with friends, keep up with exercise, and eat healthily. It sounds extremely simple in theory, but good eating, sleep and exercise will help keep you mentally healthy while you deal with some stress.
Always remember, you can turn things around because you’ve done it before. Disappointment is part of life, but you’ll recover a lot faster with a positive mindset.
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