March 15, 2017
Even with the best intentions, sometimes painful financial setbacks happen. If you find yourself dealing with a job layoff, high medical expenses, or another unexpected financial burden that stretches your finances and your stress level, now is the time to take control before your setback becomes even more serious.
One of the most important things to do when you find yourself facing financial problems is to own them. Don’t ignore them and don’t let yourself believe that they will work themselves out without you having to act. But don’t beat yourself up about your financial situation either. Treat it as an opportunity to learn some hard financial lessons, wipe the slate clean, and move forward all the wiser—and hopefully wealthier —in the future. Start on the road to financial recovery by reviewing the following steps.
Talk to a financial professional
A minor credit card balance is one thing, having several credit cards maxed out and creditors threatening to turn you over to collections is quite another. Only you know whether you can truly handle your financial situation, or if you need to call in the experts. If you feel that you do need additional help, don’t be embarrassed. Talk to a trusted financial advisor like your CPA (who has likely helped many others recover from financial problems) and develop a sound financial plan.
Know your personal situation
Take a big picture view of your finances so that you know exactly what you are dealing with. Is your setback an isolated incident or an ongoing issue? Is it temporary or permanent? Know exactly how much money you’ll need to get yourself out of debt if you need to, and know the status of your current assets.
Assess available financial resources
Determine what resources are available to you, both from your own accounts as well as other resources. For example, if you are facing medical bills, have you made sure everything has been covered appropriately by insurance? If you’ve been laid off from your job and you have medical expenses, consider Consolidated Omnibus Budget Reconciliation Act (COBRA) extended health insurance coverage, as well as unemployment insurance. If you have an emergency fund this may be the right time to start using it.
Establish financial priorities
Once you know exactly what your situation is and what resources you have available to you, you’ll need to set priorities. Know which bills must be paid immediately, and what things you can prioritize later. Go through your budget to determine if there are opportunities to decrease costs by eliminating non-essential items.
Create a personal financial plan
Work through your budget and your bills, and decide how you can get everything paid. Can you earn more with additional hours at your current job or a side job? Can you spend less? Know exactly how you’ll be spending your money over the next several months, and make a plan to track your progress.
Contact your creditors
If there are some bills you absolutely cannot afford to make minimum payments on, contact your creditors to work through payment options. Make these phone calls before your bills end up in collections, because once they are in collections, your options become more limited. Facing a financial crunch or a true monetary crisis is not something that anyone hopes to do, however, it can happen. How well and how quickly you recover depends on your ability to take ownership, honestly assess your situation, and access the appropriate help and resources you need.
Source: Advantage Magazine Jan-Feb 2016 issue.
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