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3 Steps to Handling an Unexpected Financial Setback

Posted on January 4th, 2016

At some point in your life, there is a good chance that you will face an unexpected financial setback. Whether your car breaks down and you have to pay for repairs, or whether you end up losing a major client and you are concerned about your freelance career.

When you have an unexpected financial setback, you need to be ready. Here are 3 steps to take if you find yourself facing an unexpected expense or other money setback:

1. Assess the Damage

Your first step should be to take a step back and assess the damage. You need to have a clear understanding of where you stand right now, and what is really happening with the situation.

When you find yourself facing an unexpected financial setback, it’s tempting to jump into action and start bailing out. However, we rarely make good decisions when we feel fear. Strong emotions like this can cloud judgment and that means that you might make poor decisions with your money — turning a bad situation into a worse situation.

Make it a point step back and assess the damage and the situation. While it’s hard to remain calm in these situations, do your best. Really think about where you stand, and what’s next. Be realistic about the damage, and this will help you make more logical, reasoned decisions. In most cases, you don’t have to start making decisions immediately. At the very least, wait a couple hours before taking action, if you possibly can.

Once you know the damage, you can start making decisions.

2. Know Your Assets

Next, you need to know your assets. What types of resources can you call in your situation? Once you know the damage, you can see what assets you have to tackle the problem. Look for what you have available to you, including:

  • Savings account (including your emergency fund)
  • Investment account
  • Items you can sell for extra cash
  • The ability to work more to earn more money

Understanding these assets can help you figure out how to apply your assets to your unexpected financial setback.

Don’t forget that your assets also include some of the community resources you might be able to call on. you might be able to take advantage of a food bank, or of a program through your church congregation to help you pay utility bills. This can free up some of your resources to take care of your problems.

If your setback is even larger, you can check with others to see what your options are. You might be able work out a payment plan if you are worried about certain debts. This can be a resource for you if you need help. Consider your resources, and see how they can be applied to your situation to help manage the problem.

3. Make a Plan to Get Back on Track

One of the best ways to overcome an unexpected financial setback is to make a plan. You will need a roadmap to move forward, and your plan can help you take the steps you need to overcome your setback. Your plan should be based on how you can control the damage, as well as what you need to do to get back on your financial feet.

Be realistic about your plan, and consult with a financial professional if you want a little extra help. Once you have that plan, stick with it. A plan will help you feel better about the situation — as well as keep you moving into a better future.

Miranda Marquit

Miranda Marquit

I'm Miranda and I'm a freelance financial journalist and money expert. My specialties are investing, small business/entrepreneurship and personal finance. The journey to business success and financial freedom is best undertaken with fellow travelers.

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