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Coping With a Financial Setback When You've Been Trying to Get out of Debt

Updated on November 27, 2018
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Sally is a business communications coach who gives workshops on how to keep your professional reputation squeaky clean and drama-free.

How do you cope with a financial setback when you've been working hard to save money or pay down your debts? Learn more about how to get your budget back on track when the unexpected happens.

Crunching your budget numbers can help you get back on track

A car accident doesn't always have to put a dent in your savings plan.
A car accident doesn't always have to put a dent in your savings plan.

Almost everyone has a worthwhile financial goal they're working towards. Some people set long-term goals to pay off debt, save for a down payment, open a business, or retire early enough to enjoy the golden years. Other people set short-term goals such as sticking to a weekly food budget or spending less money on holiday gifts and entertaining.

If you're a typical regular human being, living in the real world, it is inevitable that you will likely hit a roadblock that temporarily holds you back from reaching your financial goals. It doesn’t matter how big or small your financial goals are. It doesn’t matter how much planning you put into deciding on which financial goals would be a priority. Money mistakes are a fact of life. Here are just a few of the things that can make you feel like you've lost your way:

  • You suddenly become unemployed
  • You, your spouse, or a close family member is injured or gets sick and you need to take time off from work
  • You got into a car accident and now the insurance company wants to write your car off
  • A natural disaster such as a flood or forest fire caused expensive damage to your home
  • An accounting error was made and now you’re suddenly facing a hefty tax bill.

Things happen: mistakes get made, the weather throws you a curveball, you part ways with your employer. Life rarely ever happens on a straightforward, easy-to-navigate path, no matter how noble and worthy your goals are. Most people will hit a bump in the road at some point in their lives that will have an impact on their financial goals. Whether you are in the middle of a money meltdown, or you just want to know what to do if things ever go sideways, here are seven tips that will help you get your financial affairs back in order.

Boost financial security by reducing risk of identity theft

A single breach of your personal data has the potential to throw your financial affairs into chaos.
A single breach of your personal data has the potential to throw your financial affairs into chaos.

1. Survey the damage, and then put things into perspective. If your financial setback was as minor as going over your weekly grocery budget by $10.00, try to make it up the next week if you can. If you can’t catch up and get back on track the following week, ask yourself if overspending by $10.00 is a big deal? Probably not. While it is important to strive towards your budgeting goals, being a perfectionist isn’t going to help you in the long run. Remember, achieving financial independence is a process. If you let yourself get discouraged by a minor financial setback, you won’t have the energy to keep moving towards your goal. Aim for progress, not perfection.

2. Figure out how the financial setback happened. Did your financial setback happen because of something you did? (i.e.; You spent too much money on your vacation) Or is your financial hiccup the result of something that was entirely out of your control? (i.e.; Your basement was flooded in a rainstorm) Were your financial goals set too high? (i.e.; You chose an amortization period that was too short and your monthly mortgage payments are making you feel “house poor.”)

Knowing how your financial plan went off the rails will define what steps you need to take next in order to start making progress again. If your setback was the result of poor planning or a temporary lapse in judgement, don’t waste your time blaming yourself. Instead, ask yourself what you can learn from this financial setback and think carefully about what you can do to keep it from happening again.

Even if the setback was beyond your control, are there ways that you can reduce the risk of financial loss if the same thing were to (Heaven forbid) happen again? Do you need to invest in a better home security system? Can you find an insurance policy that offers better coverage in the event of a natural disaster?

3. Determine how easy (or hard) it will be to fix your financial setback. If you spent too much money on an impulsive shopping trip, can you return any of the items and get your cash back? That’s one way to quickly fix a money mistake. If you opt to take a few items back, make sure that you don’t go out and re-spend the money that you just recovered. If you paid cash for the item, get a cash refund and then deposit the money in your bank account right away.

If your financial setback was a bit more daunting than spending too much on a pair of shoes that you didn’t need, there are still ways to fix your money problem, even though it may take a little bit longer. For example, if you’ve just been given a notice that a special levy has been assessed in your condominium complex, the fee may exceed whatever you have set aside in your emergency fund. In that case, you may need to consider a bank loan in order to cover the fee. While taking out another loan will feel like the last thing you want to do when you are paying down other debt, it may be your only option. If that is the case, aim to get the best financing possible.

Another option to consider is asking for a raise from your boss. Even a small increase might be enough to set you back on the path to financial security.

If your financial setback was caused by suddenly becoming unemployed, you may need to take bigger steps than just trimming your entertainment budget. But, with a positive attitude and a commitment to moving forward, you can get back on your feet after job loss.

4. Don't be afraid to alter your course temporarily if it means it will take a little while longer to reach your goals. Einstein said, "We cannot solve our problems with the same thinking we used when we created them." Sometimes getting back on track financially means changing directions and trying something new. Re-examining your beliefs about money, debt, and saving for the future is one way to prevent future money problems and tackle the ones that you are currently facing.

Keep your eyes on your financial goals

Stay focused, yet flexible when faced with a financial setback.
Stay focused, yet flexible when faced with a financial setback. | Source

5. Rally the troops. Don’t be afraid to ask for help from others, especially if doing so will help you reach your financial goals faster. You may find that consulting a financial planner will help you invest your money more effectively. Or perhaps a qualified credit counselor is what you need if your debt has become unmanageable. Maybe rallying the troops means having a family meeting to talk to your kids about some of the changes in the household budget that need to be made. Money matters, especially money mistakes, are not always easy to talk about. But by reaching out to the right people, you’ll have more support going forward.

If you keep moving forward, you'll eventually move past your financial setback. That’s really the only way to recover from an unexpected money crisis. If you spend too much time fretting over your financial hiccup, you run the risk of slipping into negative thought patterns that may cause you to give up on your goals to save money or pay down debt.

What kind of financial setback do you worry about the most?

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© 2014 Sally Hayes

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