As we sail into 2021, many Americans are struggling with the aftershock of financial disaster. Whether it’s due to a layoff, a smaller workload, medical expenses or a change in family circ*mstances, the financial fallout of COVID-19 has been devastating for people in every sector of the economy. Recovering from a financial disaster, due to a pandemic or any other reason, is never easy. But with hard work and the ability to look forward, it can be done. Here’s how. Take a step back to evaluate exactly how much financial recovery you need to do. Are you thousands of dollars in debt? Are you looking for work? Do you have new ongoing costs to pay every month? Are there any other long-term financial implications of the recent disaster, like alimony or IRS liens? Reviewing your overall financial picture, including your current income and ongoing expenses, will make it easier to take concrete steps toward recovery. Shock and denial are valid stages of grief for any major loss or disaster, but in order for you to recover, it's important to reach a place of acceptance about your new reality. Go ahead and vent to a close friend or express your feelings online. But then, let go. Harping on the negative will only drain you of the energy you need to move on. Tim Essman of West Coast Wealth Strategies and Insurance Solutions stresses the importance of remaining calm during an economic downturn. "Don’t make any rash moves out of panic and fear," he cautions. "The best move in a financial crisis is to keep things stable until you can evaluate the situation and make rational decisions." Before you set out on the road to recovery, you should define your main goal. Are you looking to rebuild a depleted emergency fund? Find gainful employment that will help earn what you were making before? Pay down your medical bills? No matter what your end objective is, outlining your goals will make it much easier to move ahead. As you work through this step, remember to choose goals that are SMART: Specific — The goal should be clearly defined. Measureable — Make sure there's a way to measure the goal, such as dollar amounts, credit score numbers, etc. Attainable — Set a goal that is challenging, yet possible to achieve. Realistic — Your goal should not be completely out of reach. Timely — A goal without a deadline is just a wish. Here's a short video explaining each step in more detail with real world examples. You’re now ready to create a full-blown plan to help you reach your goal. Your plan should consist of consecutive steps that lead to a life of complete financial wellness. Here are some steps you should consider including in your plan: It’s time to put your plan into action. As long as your goals are SMART, you should be able to commit to your plan immediately. Be sure to review your plan occasionally and adjust if any changes are needed. Times are hard, but with a forward-thinking attitude and the willingness to work hard, recover is within reach. Like this article?Subscribeto our blog and have great financial insights delivered to your inbox weekly.Step 1: Assess the damage
Step 2: Stay calm
Step 3: Establish goals
Step 4: Create a plan
Step 5: Make it happen
FAQs
5 steps to take after a financial disaster? ›
Identify the Cause. The first, most obvious step to recovering from a financial loss is to identify what caused it in the first place. If you have a hole in your boat you don't fix it by bailing out the water, you fix the hole first. Analyse your outgoings to find areas where you can reduce costs.
What steps can you take to deal with a financial crisis? ›- Identify the problem.
- Make a budget to help you resolve your financial problems.
- Lower your expenses.
- Pay in cash.
- Stop taking on debt to avoid aggravating your financial problems.
- Avoid buying new.
- Meet with your advisor to discuss your financial problems.
- Increase your income.
- Minimize the damage. ...
- Document the damage. ...
- Cut back on expenses. ...
- Use other people's money before your own. ...
- Assess your savings. ...
- Examine your bills closely. ...
- Develop a new budget that focuses on financial recovery. ...
- What caused the biggest financial impact?
Identify the Cause. The first, most obvious step to recovering from a financial loss is to identify what caused it in the first place. If you have a hole in your boat you don't fix it by bailing out the water, you fix the hole first. Analyse your outgoings to find areas where you can reduce costs.
How to overcome from financial problems? ›- Prioritize what you can control on discretionary spending.
- Find ways to earn more money.
- Pay essential bills.
- Save money during trying times.
- Track your money-saving progress.
- Talk to your lenders.
- Consult with an expert financial advisor.
- Be present. Just listen. ...
- Encourage them to tell their story. If the person you are helping starts talking and processing aloud with you, encourage them to tell their story. ...
- Grant them permission to process. ...
- Encourage healthy coping strategies. ...
- Agree to follow-up.
- Trim your spending until you can consistently spend less than you earn.
- Build a small emergency fund to help get you through an unexpected expense.
- Seek new employment or new income streams, as necessary. ...
- Start paying down debts.
- You can succeed. Accept the reality of your challenge and handle it quickly and aggressively. ...
- Know your financial resources. ...
- Set up a budget and prioritize expenses. ...
- Take action now. ...
- Seek out professional help.
- Acknowledge the decision and move on. Financial failures and mistakes not only hurt your bank balance, but they can influence your confidence. ...
- Know (the full extent of) the damage. ...
- Change your mindset to change your situation. ...
- Find out what your options are. ...
- Take action and stay committed.
- Embrace your worth: You are not your job title, bank account, or debt. ...
- Seek support: Talking about your financial challenges with friends, family, or professional therapists can lead to better problem-solving and more assistance, resources, and opportunities.
How to stay positive in a financial crisis? ›
- Identify the Source of Your Money Stress. Stress related to dealing with money should be identified. ...
- Make a Budget or Spending Plan. Having a plan can reduce stress. ...
- Start an Emergency Fund. ...
- Increase Your Income. ...
- Automate Your Finances.
- Limit media to reduce anxiety. ...
- Get and provide warm, comforting, social support by video, phone, or text. ...
- Find ways of expressing kindness, patience, and compassion. ...
- Notice for find ways of experiencing joy in your day. ...
- Create new routines and keep practicing health behaviors. ...
- Eat well.
The plan to address your specific problem could be to live within a tighter budget, lower the interest rate on your credit card debt, curb your online spending, seek government benefits, declare bankruptcy, or to find a new job or additional source of income.
How do you prepare yourself for a financial crisis? ›- Have an emergency fund. During a recession, you may find yourself impacted by scaled back hours or job loss. ...
- Reassess your budget often. ...
- Don't fall behind on debt. ...
- Review your investments. ...
- Create a back-up plan. ...
- Reconsider your career path. ...
- Work with a financial advisor.
- Food assistance. ...
- Unemployment benefits. ...
- Welfare benefits or Temporary Assistance for Needy Families (TANF) ...
- Emergency housing assistance. ...
- Rental assistance. ...
- Help with utility bills. ...
- Government home repair assistance programs.