Financial hardships: they happen to all of us. Whether it’s defaulting on a loan, falling into credit card debt, running into an unplanned expense, or losing money on an investment, financial hardship often seems to come out of nowhere.
It may feel like the end of the world. But it doesn’t have to be. The right planning, the right allocation of resources, and a level head can get you through even seemingly insurmountable financial hardships. In this post, we’ll outline three important steps you should take if you find yourself experiencing a financial hardship. No two financial situations are identical, but the right steps can work in a wide variety of situations.
Get organized and make a plan
Your first option is to tackle the mess yourself. If your financial hardship isn’t too complicated – even if it’s still really stressful – you might have the resources to get things back on track without having to hire anyone to help. Depending on your hardship, consider these options to help tackle your difficulties:
· Consolidate debts:Let’s say you owe money on a personal loan, you’re in credit card debt, and you’ve still got student loan debt to worry about. Having tons of different sources of debt, along with all those different interest rates, can be a huge headache, and a strain on your personal finances. By taking out a new personal loan, you can consolidate all those debts into one payment, with one fixed interest rate.
· Start a budget: If you’ve experienced a financial hardship that’s making it hard to know how much disposable income you have each month; a budget can help. Without a well-ordered budget, you can end up spending hundreds – even thousands – without really having a sense for where it all went. Putting it all down in one place makes it easy to keep track, so you can get through your rough financial period more smoothly.
If your hardship really has you in over your head, don’t worry. There are still more options.
Consider working with reliable professionals
Some types of financial hardship might be more complicated, and difficult to see your way out of all on your own. Some types of failed investments, or tax problems like an IRS hardship, or even a complicated mortgage situation may all require a bit of professional help to get through comfortably.
We know what you’re thinking: “I’m already in a financially difficult spot! I can’t afford another large expense.” Depending on the type of financial hardship, not getting help might cost more in the long run. That’s because, if you’re in debt especially, drains on your bank account tend to compound. Hiring the right tax professional, financial planner, wealth manager, or debt relief specialist might seem pricey at first, but the cost of a critical financial error might be devastating in the long run.
When searching for the right professional to help you with your financial hardship, it’s important only to work with reputable professionals. Too many scoundrels prey on those experiencing financial difficulties, and working with such a person could end up costing your severely. Research any professional you hope to work with, and consult with reviews from past customers to get a sense of their reputation.
Rework your finances so you are prepared
Lastly, it seems cliché, but it by all means bears repeating: prevention is the best way to stop a financial hardship before it becomes overwhelming. Some hardships can’t be prevented entirely: an unforeseen medical bill, car accident, or house fire might all be events that come out of nowhere. However, with the right preparation, you can lessen the amount that a catastrophe will cause you enduring financial stress.
As we stated before, one of the first things you can do is start a budget. It’s smart to budget between 15% and 30% of your income toward savings and debt repayment. However, even if you do have large debts to pay down, you should still consistently – or as consistently as you can – put money aside for an emergency savings.
Properly insuring your assets, like your home, car, apartment, and even your body, are also all wise preventative measures that make facing a financial hardship more manageable. Once you have the funds, finding the right insurance policies should be high on your priority list for financial preparedness.
Financial hardships can be devastating. But with the right planning and organization, they can be managed.