5 Steps to Dealing with a Financial Setback

Inevitably, life will eventually throw you a financial curveball. It may be something relatively minor, such as necessary car repairs. Or, perhaps it’s something more extreme, like a job loss. Either way, financial challenges are sure to pop up at some point in life.

However, before you allow panic to set in, it’s essential to take a step back and analyze the situation and your finances thoroughly. No matter how severe the problem may be, there are always steps you can take to ease the financial burden. 

How to Deal with Financial Challenges

1. Assess the situation. Take time to review the hardship from multiple angles and see if there is an easy fix. Sometimes the surprise of the challenge causes more stress and anxiety than it genuinely warrants. 

For example, if your car has severe damage and it’s going to cost thousands of dollars to repair, along with a healthy period at the mechanic, it may be easier and cheaper to buy a new or used car. 

Also, look into other choices available to you. If you can’t afford to repair your car immediately, for example, look into public transportation or even ride-sharing options. Both can be viable options to help you get from point A to point B while you’re saving up enough money to repair or purchase a new vehicle. 

2. Review your current financial position. Start by reviewing your monthly budget. If the unforeseen expense is somewhat minor, you may be able to cut out some expenses temporarily to help cover the cost. For example, many subscription services allow you to pause your subscription for a month or two.

If the setback is more costly, review your savings. Start with your regular savings account. If that cannot cover the expense, consider your emergency fund, if available. An emergency fund is money put aside specifically for situations like this – with a goal of saving 3-6 months of living expenses. That way, if you do lose a job, you can meet your financial obligations while you look for a new one. Don’t have an emergency fund? Learn how to build one today.

3. Consider your investment accounts. If you cannot alleviate the financial challenge with your regular savings, you may want to turn to your investments. If you work with a financial advisor, it’s a good idea to give them a call. Pulling from certain tax-advantaged accounts may result in penalties and require you to pay taxes. If you have other investments, such as a Share Certificate Account (Certificate of Deposit), consider this option first. Yes, you will likely incur an early withdrawal penalty, but this charge is typically much lower than pulling from market-based investments.

4. Review loan options. Loans are helpful by providing the funds you need immediately with the opportunity to repay over time. For more minor financial challenges, a personal loan may be the perfect solution. If the issue is more significant, such as ongoing medical expenses, a home equity line of credit will provide a lower-rate option that allows more flexibility in borrowing. 

5. Finally, ask for help. Never be afraid to ask for help – especially when it comes to your finances. Sometimes an outside perspective from a financial professional can help you see the hardship differently and offer solutions you may not have considered.

We’re Here to Help!

Life is full of curveballs, especially when it comes to our finances. While these challenges are never fun or convenient, having a plan in place to deal with them can save you a lot of stress and money in the long run. 

Be proactive and work on building up your emergency fund. If you’re currently facing a financial setback, we’re here to help. Our team will work with you one-on-one to find the right solution to help you get back on the financial track. 

Please stop by any of our convenient branch locations or call 248-322-9800 today.

 

© Genisys Credit Union and www.genisyscu.org, 2021. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to Genisys Credit Union and www.genisyscu.org with appropriate and specific direction to the original content.

« Return to "Blog"