After a setback, many people assume that they will be able to bounce back quickly, whether it’s losing a job, having to meet unexpected expenses, or dips in the stock market. However, coming back from the financial abyss isn’t always guaranteed. Many people can linger there for months, if not years, without pushing through.
Often, the difference between success and failure in this situation is your mindset and habits. If you can get these right, then moving forward and recovering is easier.
So, why aren’t you bouncing back from financial issues, and what should you do instead?
You are not looking at the numbers objectively
One reason you might not be bouncing back from a financial setback is that you’re not looking at the numbers objectively. If you can’t face reality the way it is, then problems can compound over time. This is particularly the case with debt. If you aren’t dealing with it quickly and efficiently, then it will build and eventually snowball.
The trick to dealing with this is to face the situation head on. You’ll need to spend a couple of hours sitting down and going through the numbers to figure out where you stand financially. Think about your debts, expenses, and assets and what you have to play with. If you need to create a spreadsheet for more clarity, then do so. Don’t judge yourself, just try to understand the position you’re in.
Your budget is unrealistic
Another reason you might be in financial trouble is that your budget is unrealistic, you’re not tracking where your money is going, meaning you are always leaking funds. This is easier to do than many people imagine. Just a few trips or outings every week with friends can often blow through all of your disposable income.
The best way to deal with this problem is to assess your budget. The idea here is to assign every dollar some sort of purpose in your life. If it doesn’t have the go-ahead from you and it’s not being prioritized for essentials, it shouldn’t be spent.
When you adopt this approach, you’ll notice that the actual numbers in your bank account start rising significantly after three to six months. You’ll find that you’re able to much more aggressively save than before and move your financial position.
You’re not fighting your corner
Sometimes people get into trouble financially by not fighting their corner. They simply allow other people to walk all over them without taking action. This is particularly the case for personal injury and situations where income has been jeopardized by someone else’s actions. Many people adopt a passive attitude.
Key to dealing with this is to be more active and work with attorneys and other professionals who can help you recover your money. Simply standing still and not doing anything isn’t an option in many of these cases. Once you do start taking action, you’ll notice that you’re able to improve your financial situation considerably and in a short space of time.
No emergency fund
Not having an emergency fund is another reason why you can’t bounce back from financial issues. Emergency funds are critical because they provide you a cushion that you can use to spend your money most efficiently. Even if you’re facing a large number of costs, emergency funds allow you to meet them head-on instead of having to take on debt or spend more slowly in a way that leaves you worse off overall.
The best way to create an emergency fund is to start small. All you need is $500 to $1,000 and a savings account. Then you can make small transfers every month, perhaps $20 to $50, and build up your funds gradually. After a few years, you should find that you hit critical mass between $5,000 and $10,000.
Believing in quick fixes
Believing in quick fixes is another mindset you’ll want to avoid when trying to bounce back from a financial setback. Many people have unrealistic timelines or believe that less work is involved to recover financially. Unfortunately, it takes much longer to build financial competence than many people believe, often many years.
Therefore, try to change your attitude, get into a place in your life where you accept that it’s going to take 1-3 years to recover from a financial setback. Look at the day-to-day small wins that are working in your favour, like discounts at the grocery store or reducing your utility bills. These small changes can lead to larger improvements going forward.
Income hasn’t increased or has decreased
As obvious as it may sound, if your income hasn’t increased or is decreasing over time, then it becomes more difficult to bounce back from financial setbacks. Unfortunately, costs continue to rise, so if income isn’t rising, then it keeps you stuck.
You can boost your income through various channels. One of the best ways to do it is through freelancing. Sometimes just working an hour or two extra every day can double your income. Other options include upgrading your skills or getting a new side hustle. You can try job hunting or negotiating a raise, but it’s usually better to move between companies already established in your industry. Just a few hundred extra dollars a month can be all it takes to completely transform your financial position.
Your lifestyle isn’t adapting to current reality
Finally, and perhaps most importantly, if your lifestyle isn’t adapting to your current reality, then it can be challenging to bounce back from a financial setback. This is one of the hardest habits to change because you don’t want to adjust the way you’re used to living your life. For example, going on vacations, dining out, and subscriptions are all nice things to have, but they prevent you from building that financial surplus you need for recovery. To avoid this problem, you need to temporarily downgrade your lifestyle. Cooking more at home and cancelling services you don’t use is a great place to start. You also want to do things like shop smarter and only buy the things you actually need rather than those that you want. If it helps psychologically, view it as a short-term recovery mode.
