How to Get Out of a Financial Disaster Easily
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Have you lost a lot of money due to a wrong investment decision recently? Are you currently looking for a way out of that huge debt that has made you restless? You are not alone in this. More people are facing serious financial difficulties today than ever.
Whether the financial loss you face is due to common reasons like divorce, medical bills, overspending, bankruptcy or a recent defraud you faced, there is a comeback plan for you. Your path to recovery requires you to take some actionable steps which you must consistently follow.
Here are some steps you need to follow to recover from a financial disaster.
1. Accept the current state of your finances.
You can’t continue to wallow in the misery that has occurred and expect an improvement in your finances.The starting point for a financial recovery is to accept the reality of the present situation. You have to be realistic about the state of your finances and stop living in self denial.
Yes, you were a victim of a wrong investment scheme or someone defrauded you. And it was so devastating for you. None of that matters now. What you need to focus on is a great comeback plan that will put you in a better position financially.
2. Analyze your current financial situation
After having the courage to accept the loss that has occurred, you need to carefully analyse the current state of your finances.
You must know what resources you have at the moment and the amount of debt you need to settle.
Having an in-depth understanding of your current financial situation will help you develop a realistic recovery plan.
Ask yourself these questions to assess your situation:
- What are the assets I currently own?
- How much money do I owe?
- How much income do I earn each month?
- Who owes me some money?
- How much do I spend each month?
- What is my credit score?
Try to give honest answers to these questions to help you with insights on how to recover from the loss.
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3. Create a SMART financial goal
You need to create a financial goal for yourself that is specific, measurable, attainable, realistic and time bound.
You can start with just one or two goals for a short time and create more goals later. Here's how your goal should look like:
Specific: It must be clear and have a targeted end result. For instance, goals like; “I want to earn $1,000 in my savings account by September 30th, 2021″ or “I want to pay off $500 out of my debt by October 1st, 2021" are specific and point you in a clear direction.
Measurable: You must be able to measure your progress towards the goal. In the example above, $1,000 was used to measure the expected outcome of the goal at the end of the duration.
Attainable: Your goal must be set in such a way that it’s neither too difficult nor too easy to achieve. It must be within your capacity to accomplish.
Realistic: If you have a lot of debts to settle, your primary goal should be to gradually pay off the debt rather than aiming to become a millionaire in a few months.
Timely: Your goal must have a certain deadline attached to it in order to experience its desired impact in your life.
4. Create your recovery plan
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Now that you've created some SMART goals for yourself, it's time to create your recovery plan. Your plan should consist of continuous steps that will lead you to financial freedom.
Here are some steps your plan should include :
- Cut down on your spending until your expenses are continuously lower than your income.
- Get a new job or learn valuable skills in high demand that could create new income streams for you. You can start with blogging or selling stuff online for extra cash.
- Start paying down debts. You could consider consolidating your debts by combining several high-interest rate loans or credit card balances into one new loan which has a lower interest rate. Doing this will simplify this step for you.
- Save more aggressively towards a large emergency fund with up to six months’ of living expenses.
5. Take actions on your plan
This step is important because a plan for financial recovery is nothing more than wishful thinking until you begin to take action on it. You’ll improve your skills and become more knowledgeable as you take action.
As you achieve each step in this journey, you’ll find that your money stress will shrink and your peace of mind will grow. You’ll also see unexpected degrees of freedom opening up in your life, as career choices and personal choices that would have never been an option for you are now realistic and even desirable choices.
And if you have any other tips that have worked for you, please share in the comments section.
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