How to Get Your Finances Back on Track After Losing Everything


Losing your job, your house, your car, or your bank account can shake your confidence and leave you feeling helpless. But the best thing you can do when you hit rock bottom is dust yourself off and put the pieces back together again. While bouncing back after financial loss may seem impossible, there are several strategies you can use to get your finances back on track.

1. Assess the Situation

Some financial setbacks occur because of situations beyond your control, like losing a job because your employer had to reduce expenses, or incurring massive medical debt after a serious illness. But even when you have limited control, you should assess the circumstances that led to your downfall and figure out what you did wrong, or what you could have done differently to avoid the experience.

Maybe the setback was caused by poor financial choices, such as buying more house than you could afford, which then led to losing the home. Or maybe shopping became your therapy, and rather than save, you blew your income on "stuff" and never built an emergency fund for the unexpected.

If you can narrow down what contributed to the mishap, you can come up with a plan to dig yourself out of the hole and avoid repeating the past.

2. Change Your Attitude

Attitude is everything in these types of situations. After losing everything, getting out of bed every morning can be a struggle. And depending on the gravity of the setback, a comeback can feel like an unrealistic dream. But to get your finances back on track, you have to change your attitude and believe there's light at the end of the tunnel.

If you make excuses or think you're destined to fail, this can become a self-fulfilling prophecy wherein you never reverse the situation.

3. Adjust Your Budget

It takes income to bounce back from a financial disaster. If you've lost everything, chances are you're working with minimum income. You have an uphill battle ahead of you. But if you prioritize spending, save more, and look for ways to generate additional income, you can begin the road to recovery. (See also: Build a Budget in Five Minutes Flat)

Take a look at your budget to make sure you're spending less than you're earning. You need to keep expenses as low as possible, which frees up cash for paying down debt and building an emergency cash reserve. Although there's nothing fun about losing a home or a car, you can turn this tragedy into something positive. You need a roof over your head and transportation, but rather than jump into another housing or car payment prematurely, see if you can rent a room from family or friends. This will probably be cheaper than getting your own place. And if you use public transportation, you'll save on auto insurance, personal property taxes, and gasoline.

You also can boost your income with a part-time job, or sell stuff to generate disposable income. The money earned might not be a lot at first, but it can jump-start your savings account and help pay off debt and past due accounts.

4. Get a Financial Mentor

Some people experience a financial downfall because they don't know the fundamentals of managing their personal finances. In this case, education is how you bounce back and make smarter decisions moving forward.

The good news is that you don't have to spend money on a personal finance course to learn the basics. There are plenty of resources at your fingertips including reputable financial blogs and websites that cover various aspects of personal finance from saving money to debt management. Working with a financial adviser is also helpful because these professionals can guide you through a financial hardship.

If you never learn the right and wrong ways to manage your money, you'll keep making the same mistakes over and over again.

5. Set Realistic Goals

Naturally, you want to rebound as quickly as possible and regain what you've lost, but you have to be realistic and patient. By setting unrealistic goals, you're ultimately setting yourself up for failure.

After a foreclosure, your plans might include purchasing another home after 12 months. But considering how you'll need to improve your credit score and save money for a down payment, your expectations could be unrealistic, and if you don't attain this goal, you could become discouraged and lose focus. If you take your time and establish a more realistic time frame for buying another home — perhaps two or three years — you're likely to achieve this goal.

6. Don't Give Up

No plan is perfect, so even with a solid strategy for bouncing back, you could hit a few roadblocks along the way. The worst thing you can do is give up. Stumbling blocks will happen, and it's not the number of setbacks that matter but rather the number of times you pick yourself up. If you can rebound from every setback, you'll eventually win and reverse the situation.

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