How to Cope with Financial Setbacks

Adjusting Financially

Reset your budget. Whether you take a hit to your personal or business finances, you will need to reevaluate your current budget. Whether you have to pay for an unforeseen expense or budget for a decrease in income, you will need to look at your finances and determine where to make changes. Calculate what your budget will be with the setback and compare it to your current financial plan. For example, if you are laid off, you will need to look at your savings, severance package, or unemployment benefits in order to develop your budget while you look for a new job. As a business owner, you may need to calculate how to continue operating your business on a shrinking revenue stream.

Cut expenses. With any financial setback, you will need to rein in your spending. Because money will be tight, you will not be able to spend money in the same way that you did before the setback. Look at your budget and determine what things can be cut and what is essential. For example, if you are a business owner, you might cut back on discretionary spending until your business bounces back. With personal finances, you might cut back on eating out and non-essential purchases until you are back in the black.

Work together. Whether as a family or a business, you will need to come together with those around your to get through any setbacks. You will need to work together to budget and cut costs. You will need to ensure that everyone is on the same page and aware of what needs to be done in order to pull through the financial crisis. You should have a family or business meeting to outline a plan of cutting costs and saving money. For example, as a family, you get your kids involved with cutting costs by having them do more chores around the house instead of hiring extra help. As a business, you might brainstorm ways to scale back on expenses without cutting into your cash flow.

Plan for the future. Develop a plan to minimize your or your business’ chances for financial difficulties in the future. Although you cannot eliminate the possibility of setbacks, you can mitigate their impact. Consider saving some money in a “rainy day” fund designed to help you get through financial setbacks. You should also invest in insurance to cover the expenses of catastrophic losses. For your personal finances, you should save up at least six months’ worth of living expenses. For example, if your living expenses total $2,200 a month, you should save $13,200 for emergencies.

Get some help. If you are having a hard time dealing with your setback, you should consider getting some professional help. An accountant or financial planner may be able to help you get your finances back on track. They will work with you to develop a budget and plan for the future. You can find specialists and experts via the Financial Planning Association and the National Association of Personal Financial Advisors. Be sure to look for someone who works for a Housing and Urban Development-certified agency.

Handling Your Emotions

Address your emotions. Losing a job or dealing with a failing business can be stressful and induce feelings of shame and self-doubt. Left unchecked, these emotions can be crippling and make it more difficult for you to bounce back. Consider talking to someone like a religious leader or a mental health professional who will help you get some perspective and move through negative emotions. Although it is important to grieve your loss, the sooner that you address the negative emotions attached to your setback, the sooner you will be able to move past them.

Take care of yourself. Although the negative emotions attached to a financial setback can be difficult to address, practicing some self-care can help you deal with them. Keep up your exercise routine and continue to give yourself time to relax. If you do not take time for yourself, it will be difficult to shed the anxiety attached to your financial setback. You might try relaxing by meditating, exercising, or doing some other activity that makes you feel good. Although cutting back on expenses is necessary, you should prioritize those activities that value the most. For example, if your gym membership makes you happy, do not cut it when you trim your expenses.

Lean on your support network. In the face of financial strain, you will need the support of your friends and family. Not only will these people help you come up with solutions to the setback, they will also help you deal with the accompanying stress and anxiety. Make sure that you prioritize quality time with your loved ones. Consider looking for inexpensive family activities, like going hiking or hanging out in your local park. Although financial troubles at work may make it difficult to spend time with your family, make sure that you prioritize time with your loved ones. You should schedule times that are family only and stick with them.

Be upfront with your problems. Although financial setbacks can make you feel ashamed, you should not hide those problems from your family or friends. If you try to hide or are dishonest about them, your financial problems can cause serious damage to your relationships. In order to build and maintain trust with those that you love, you need to be upfront with them about any financial setbacks. When talking to your children out your setback, make sure that you tell them about it in a way that is age appropriate. Try to let younger children know what is going on without causing them excess anxiety, while telling older children how they can help out.

Avoid compounding your problems. When facing a significant financial setback, you may resort to risky behaviors that will only compound your problems. For instance, you might take out a high interest loan to meet your financial needs. You might also abuse drugs and alcohol to manage the negative emotions associated with your setback. Ultimately, these kinds of risky behaviors will only sink you deeper in debt while possibly damaging your personal relationships.

Managing Setbacks to Your Business

Know what to cut back on. When your business is facing a financial setback, it can be difficult to know what to cut. Although you need to make them, some cuts can cause more harm than good. Look to make cuts in non-essential areas that will not compound your difficulties. For example, making substantial cuts to your accounting department will eliminate the people most capable of helping your business navigate your setback.

Use it as an opportunity to look at the big picture. A major financial setback can be an opportunity to reevaluate your business plan. Think about what aspects of your business are working well and what parts are struggling. You may find that some tweaks to your business plan can help you eliminate or reform problematic aspects of your business and avoid issues in the future. For example, you may find that the brick-and-mortar store is losing money while your online sales are doing well. This might lead you to scale back on the store while expanding your online presence.

Keep looking forward. If your business is struggling, continue building towards your future. Although you need to address your immediate financial problems, you should not sacrifice your vision of your business’ future. Make plans for five and ten years down the road. This will keep you and your business moving forward while you deal with your current setbacks. To boost motivation, consider creating some company-wide benchmarks. For example, you might challenge your employees to double sales by a certain date and incentivize them with bonuses or other perks.

Expand your network. In the face of a financial setback, your connections may provide you with some opportunities for growth. Pursue any leads that may expand your business or lead to new opportunities. Do not be afraid to go outside your comfort zone and look for opportunities that may lie in unique locations. For example, you might approach a local nonprofit about developing a partnership that allows them to use some of your resources while providing you with some discounted marketing.