If you’ve recently experienced a financial setback, here are six steps you can take to get back on track.
Don’t Beat Yourself Up
After experiencing a setback, it can be natural to feel like you did something wrong. However, putting added pressure on yourself will not help. Instead, make a mental note of what might have gone wrong, and learn from your experience so you can avoid repeating it.
The last thing you want to do is panic and rush to solve your problem. Most likely, that will only make matters worse. Instead, take a moment to acclimate to what has just occurred. Realize you don’t need to plan out the rest of your life. Instead, start by focusing on your most immediate needs.
Make a list of time-sensitive responsibilities and start with the most important. For example, how will you pay those bills due at the end of the month? If you recently lost your job, make sure you’ve filled out all the required forms correctly, so you can avoid delays in receiving your unemployment benefits.
Take Inventory of Your Finances
Besides your personal savings don’t forget about your IRA or 401(k). Legislation recently passed through the CARES Act, allows those impacted by COVID-19 to take distributions of up to $100,000 from certain retirement plans and repay it within three years, with no federal income tax consequences. Although it’s never ideal to tap into the principal balance of your retirement savings, this could serve as a short-term solution.
Cut Non-Essential Expenses
Look for expenses you can cut like that Stitch Fix subscription or that gym membership you’re not using. Individually they may not seem like much, but collectively could add up to significant savings. However, if a $50 a month expenditure brings you joy, look for another item to cut. Whatever you do … do NOT cut back on essentials like health, car, or homeowners’ insurance—because that could make matters worse if the unexpected occurs … again.
Don’t Be Afraid To Ask For Help
During difficult times it can be helpful to get the opinion of a trusted financial professional—just make sure to ask ahead of time if the consultation will cost you anything. Also, make sure to work with a fiduciary—someone obligated by law to place your interests ahead of theirs. By speaking with a financial professional, you might find that your situation is not as bad as you think.
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