If you’re suffering from a catastrophic financial setback, you’re not alone. The Covid-19 pandemic has affected millions of people worldwide. It’s painful, and you might feel like you’re alone or that your situation is unique. Rest assured, the path to financial recovery is well-worn and many have walked it before you. In other words, there’s hope and you will make it through to the other side. You just need a plan.
I put together 5 steps that will get you started:
1. Accept
The first thing you must do is accept your situation. Accepting doesn’t mean to give up, but rather acknowledging that it happened and understand you’ll have to take steps to turn things around. “It is what it is” is an overused phrase these days, but still accurate. You can’t change what has already happened, and resisting it is a waste of your energy.
Yes, it bites. Yes, it’s devastating and much of what happened isn’t even your fault. But none of that matters now. All that matters is what you’re going to do to change your situation.
2. Assess
Now it’s time to take inventory of your situation. You’ll have to identify your resources and liabilities so you can develop your recovery plan. Before you can chart a course to where you want to go, you have to know where you’re at.
Start by answering these questions:
- How much money are you bringing in each month?
- How much do you spend?
- How much do you owe?
- What other assets do you have?
The objective is to fully understand your situation so you can map your way back to financial stability.
3. Set Your Goal
Now that you know where you are, it’s time to decide where you want to go. When setting a goal, it’s important to be specific. You can’t make plans for vague goals, no more than you can chart a course to “somewhere.” A vague goal may sound something like, “I want to have more money” but a specific goal would be more like, “I want to have $10,000 by December 31st 2020.” When you have a clear destination you can move in the right direction.
Be sure your goal is attainable and realistic, but don’t be afraid to push yourself. Another great tip is to set smaller goals that lead to your primary goal. If you want $10k by a certain date, set smaller money goals in between. You’re still moving toward your main goal, but giving yourself incremental wins along the way. This will go a long way toward keeping your spirits up while you’re implementing your recovery plan.
4. Create the Plan
Armed with the information you got from the first three steps, you’re now ready to make a plan. The reason the first three steps are important is that you can’t make a plan if you don’t know where you stand. Perhaps you simply need to increase the amount of your monthly income, or divert more cash toward paying off debt. Maybe it’s a combination of both. It’s a good idea to create a plan that involves both defensive and offensive actions. That will help you keep you fulfilled and motivated as you move forward. For example, you could focus all of your efforts on only paying off debt, which is a defensive action. Reducing your debt is a good thing for sure, but if it’s the only action you take you might burn out. It’s just not all that fun. But, if while you’re paying off debt, you also put cash toward your retirement or savings accounts, you’re going to feel good. Experiencing emotional satisfaction during your recovery period is important because after all, you’re human and not a machine.
5. Implement
You know where you stand, and where you want to go. You’ve developed a plan, and now it’s time to take action. Believe it or not, this is where many people falter. They get all of the other information together, even make a plan, but for some reason never get around to implementing it. A plan not put to use is just wishful thinking, and that won’t change your situation. The key is to not only take action, but to take consistent action. Setting a specific goal and creating a plan helps you do that. Remember, even the best-laid plans will need some correction and adjusting once they’re underway. There are too many variables to account for every possible scenario, so it’s okay to make changes to your plan as you go. Stick to it, and you will get to your destination.
These five steps will help you turn the corner and recover from a financial setback. Many people dream about changing their situation, but are only able to do so when they take consistent and persistent action.