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Dealing with Financial Setbacks

Before we go into advice for dealing with financial setbacks, it's important to address that not all setbacks are the same.

Types of Financial Setbacks

There are minor setbacks like a car emergency that required you to dip into your savings or slipping from your budget, making a purchase you couldn't afford and now can't return. These setbacks don't drastically change your overall picture. Maybe your savings is $500 less or your total credit card debt is up by $200, but overall this is just a bump in the road.

A major setback is more of a financial hardship like a medical emergency that leaves you on short-term disability for a period of time or losing a job unexpectedly. There is more uncertainty with these setbacks and they tend to take time to work themselves out. If you've lost your job, you can't guarantee when you'll get your next gig. The financial repercussions could be a small dip in your savings or a complete wipe-out of your emergency fund and impossible to predict until the event is over.

By being able to identify the type of setback you're facing, you can begin to think about how to address it.

Anytime you suffer a setback or disappointment, put your head down and plow ahead. - Les Brown

Minor Setbacks

A minor setback can be discouraging, especially if you feel you've made progress that was undone. To be able to move on from this setback, you need to understand why it happened in the first place. Once you know the why, you can begin to brainstorm ways to prevent it in the future.

If you've made an impulse purchase at a sample sale and can't return those items, consider unsubscribing from those flash sale emails or the social media account that notified you.

If you've had to put an emergency car repair expense on your credit card because you didn't have any emergency savings, a good solution is to start an emergency savings fund.

The goal don't focus on what happened, instead focus on why it happened and how you can prevent it in the future.

Major Setbacks

If you're experiencing a major setback right now, your focus should be on getting through this setback.

If you lost your job or a large account as a freelancer, suddenly all of your worries seem ten times larger because of this stressful money situation. Worrying about how this event will hurt your savings or add to your existing debt will only add stress to your life. Be mindful and realistic about your situation, remember that it's out of your control, all you can do right now is: do your best.

If you have student loan payments, call your student loan provider and let them know your situation. They will try to do what they can, while they may not say what you want to hear it's important that you communicate with them. Otherwise, how can they help you if they are unaware of what's going on in your life? When I was unemployed and couldn't keep up with my payments, I was able to defer my student loan payments for 6 months.

The same goes for your credit card companies, while they may not be as lenient as a student loan provider, they will still try to do what they can to help you. A friend once called her credit card company when she was let go and they were able to give her a break on late fees for a few months. You never know how someone can help unless you ask. Remember, the first priority for these companies is to get paid and if they can make the transition smooth for everyone, they will do what they can.

Go through your monthly subscriptions and pause anything that's unnecessary. Many subscriptions have an option to put a hold for some time, without deleting your account and all of your history completely. Know that this is temporary and when you're back on your feet, you'll be able to go back to anything you're missing. Also keep in mind that sometimes, there is more than monetary value to things. I kept my monthly subscription to Horti, a live plant subscription, when I was unemployed because my urban garden makes me happy.

Once you're at the end of the tunnel and start to get back on your feet, rework your budget and update your debt snapshot to fit your new lifestyle. Many people fall into the trap of saying "I'll start my budget when..." There is no better time to start than now. If you were unemployed and finally started a job, you can use a paycheck calculator to estimate your take-home-pay after taxes.

Most importantly, don't forget that unexpected events in life are guaranteed. Prepare for what you can and learn from the moments you didn't anticipate, so that you can prepare for it next time. With this mindset you'll be on the path to financial independence 💥


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