How To Recover After a Huge Monetary Loss
Financial emergencies can happen to everyone. No matter how much you earn or have saved in the bank, losing a job or experiencing a medical emergency can wipe out any safety net you have in place.
It can be a scary situation to deal with, but getting back on track following a huge monetary loss will likely be your top priority. Julie Ramhold, a consumer analyst with DealNews.com, shared some important steps you can take to get back on your feet.
Cut (Way) Back
Ramhold said that if you’ve suffered a huge financial loss, you likely can’t afford any unnecessary expenses. So it’s important to cut back your budget to the bare bones, even if it’s just temporarily.
If you had to replace your car’s transmission, for instance, it can be difficult to give up fun spending like streaming services or an occasional DoorDash order. “And it might not seem like it’s going to make that much of a difference, anyway,” Ramhold said. “But the truth is if you’re paying a huge monthly fee — or even $15 per month — for something you don’t actually need, you’re just making your financial situation more difficult and recovery will take longer.”
She said it’s important to be brutally honest with yourself and either pause spending on these types of expenses or cancel them outright. You can then put those fees towards something more important, such as paying for necessities like food, rent and utilities.
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Build Your Reserves
Following a financial emergency, you likely used up any emergency funds you had set aside. Though it will be tough in the beginning, it’s important to prioritize building those reserves back up. A solid emergency fund of six months’ worth of expenses will help prevent you from racking up debt the next time there’s an unexpected expense.
Ramhold said it’s fine to start small. “Contribute however much you can to your savings to start building it back up, but don’t overextend yourself further,” she said. “If you can only do $5 a month while you’re trying to recover, that’s totally fine — you just want to start the process again.”
Think of the Future
Next, it’s time to take a close look at your financial situation and be honest about the setback you suffered. “Once you know the extent of the damage, start putting together a plan on how to recover,” Ramhold said.
For example, if you lost your job, Ramhold said you may want to set a deadline for yourself to find another one. “If you’re unable to find a job in your field, you may have to temporarily take something entry-level to help pay your bills while you continue your search for something more suitable.”
Most people who suffer financial losses do eventually get back on their feet. “But the truth is that it can shake many and leave them skittish, even after they’ve recovered,” Ramhold said.
Having a plan in place can alleviate some of that anxiety around a similar situation happening. Plus, you know you have a plan in case it does happen again, in which case you’ll be better prepared to handle it.
Consider a Side Gig
There’s only so much scrimping and saving you can do. At the end of the day, you still need to meet your basic needs. So if you want to supercharge your savings, it can be helpful to take on an additional side hustle.
You might be thinking: I already have a full-time job. That’s fair, but you don’t have to commit to a whole other position — just a few extra hours per month could allow you to earn some extra cash on the side to help recover more quickly.
Ramhold suggested picking up a consulting gig, or selling products that you make, whether it’s something crafty, baked goods, or even design services. “Don’t get overzealous with these side projects,” she warned. “It can be really stressful to manage both a regular full-time job and a side hustle that may seem like part-time at first, but rapidly turns into full-time.”
Instead, be reasonable about what you can handle and charge what you’re worth so you can avoid burnout.
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