Thanks in part to the knowledge you’ve gained from KLS’ educational tips and tricks, you’re in a wonderful spot financially – your debts have dwindled, your credit score has soared, and you’re busy building a nest egg for yourself, your family, and your future. But what happens when an unexpected financial loss sends your hard-earned progress to a screeching halt? Whether you are the victim of identity theft, in the middle of a divorce, or staring down a mountain of unexpected medical bills, sudden blows to your savings unfortunately can and do happen. Happily, with careful planning and budgeting, bouncing back from financial damage is a completely attainable goal.
While I naturally would have preferred to skip over my past periods of financial hardship, they were ultimately a blessing in disguise – as frightened and uncomfortable as I may have been in the moment, a confrontation with my abrupt lack of finances forced me to adapt to the situation at hand and develop money management skills that I have carried with me to this day. The first and arguably most important step you can take when rebuilding your savings is to accept your circumstances. Cold though it may sound, steeling yourself against obstacles is much more likely to lead to future success than remaining stuck in the past. That being said, you shouldn’t feel alone – almost all of us have, at one point or another, dealt with difficult times. Never doubt that you are able to get through this!
Once you have taken a deep breath (or twenty) and settled into a calmer, more goal-oriented mindset, it’s time to plan. Examine the numbers. Are you starting from scratch, from the middle, or somewhere in between? Determining the actuality of your situation is vital before you can develop a realistic plan for the future. A few basic questions to ask yourself: First and foremost, how much money do you owe? How much do you typically spend per month? What is your income? What expenses can you live without? Making your way back up the ladder does take work, but you can jumpstart the process with just a few very simple steps. Get into the habit of:
- Eliminating frivolous spending. There is no reason to continue buying expensive lattes each morning, paying for HBO and Netflix subscriptions, eating out multiple times a week, or adding unnecessary new pieces to your wardrobe. Cook for yourself, shop secondhand, and never go grocery shopping on an empty stomach.
- Considering each purchase you make. Allowing yourself a full 24 hours to weigh the pros and cons of personal purchases is an easy way to curb impulse buys. Unless it’s an absolute necessity, chances are you won’t end up going through with the purchase in the end.
- Mirroring your spending with your saving. Just one of many excellent tips I learned from my mother! Treating yourself (within reason) every now and again is okay. Say you head to the nail salon and splurge on a manicure. You’ve spent $35.00, so now you must also put $35.00 towards your savings.
- Viewing your purchases as hours worked rather than cost. Divide the price of an item by your hourly wage to determine just how much time it would take for you to recoup the money. If you make $12.00 an hour, that new television you’ve been eyeing suddenly may no longer seem worth it!
- Setting aside one day of the week to spend nothing. Go on a family bike ride, treat yourself or your loved ones to a home-cooked meal, or simply get comfortable with a snack and a good book. You don’t have to spend money to have a great time!
In addition to these small everyday habits, you’ll also need to outline a long-term plan. Lay out your existing and upcoming bills, and decide exactly how much per month you will allot towards each one. In the event that you find yourself downright unable to make even the minimum payments on some of your bills, it is extremely important to contact your creditors right away and discuss your options. Despite the fact that KLS may handle some of your accounts, we (and our clients!) would always prefer for you to reach out first in order to work out a reasonable payment plan, rather than neglecting your bills out of fear and ending up in collections. Financial rebuilding is never exactly fun, but reaping the rewards of your hard work and realizing that you have the ability to roll with life’s punches is immensely satisfying. We at KLS not only believe in you, we are always here to help!