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No matter how well you handle money, life happens.
We get in a car accident, we lose our job, we get divorced.
Any of these or other events can disrupt anyone’s financial well being and turn it into a nightmare.
But there is hope.
With a little work and smart money moves, you can get back on your feet financially, no matter the financial crises that you face.
And this even includes a financial disaster from the collapsing of the stock market, banking system, or the economy.
In this post, I will walk you through the steps you need to take to pick yourself back up and get back on track to meeting your financial goals.
By the end, you will have a detailed plan of what you need to do, and what you should not do, to improve your situation.
10 Steps To Get Back On Your Feet Financially
There are 10 key steps you need to take to restore your financial health, and they have 3 themes to them:
- Stay calm
- Focus on the long term
- Take advantage of the situation
I will walk you through each one and if you follow the steps, you will not only survive, but will be well prepared for the next financial crunch that comes along.
#1. Stay Calm
The biggest enemy we face is usually ourselves.
We get in our heads and go down the path of worry and fear.
So the first thing you need to do is relax and keep things in perspective.
Do not make decisions based on emotions. It never works out.
You make bad money choices when you are emotional. You make bad relationship choices when you are emotional.
Heck, you make bad eating decisions when you are emotional.
Do nothing until you are calm and back in control.
If your finances fell apart because of a stock market crash, know that the market will come back.
It always does.
There will be pain in the short term as you see the value of your investments fall, but this doesn’t mean you won’t be able to retire.
Before you know it, the market will rise again and your retirement plans will be back in line.
If your financial health is disrupted because of divorce or injury, know too that you can get through it.
Many people do.
This isn’t to downplay the struggle, as it is real and it will take a lot of effort on your part to restore your finances, but it can be done.
#2. Educate Yourself
Once you get your emotions in check, you need to start educating yourself.
If you are like most people, you lack financial literacy.
So you need to read some personal finance books to help you see that the world is not over.
Here are some of the best personal finance books I recommend you read.
Think And Grow Rich (Buy On Amazon Here)
This book by Napoleon Hill is a classic.
It was written in the 1930’s as a self help book after the Great Depression.
Hill went around and interviews successful people with the goal to help motivate others to be better.
Many of the lessons apply to your finances, which is why this is a fantastic read.
Written by George Hill, this book contains 7 personal finance principles to live by.The premise follows a Babylonian man looking to manage his finances.The thing I enjoy most about this book is how it is put together.It reads in a storybook fashion, much like Aesop’s fables.
A classic personal finance book by Dr. Stanley.He shattered the common belief that millionaires were special people, working high salary jobs.Through interviewing hundreds of interviews, he breaks down what the typical American millionaire looks like, how they live, and what job they work.It will open your eyes and realize that anyone can become a millionaire.
Your Money Or Your Life (Buy On Amazon Here)
This book by Vicki Robin flies under the radar outside of the personal finance world.
What I mean by this is most people never heard of this book.
But you will find most everyone interested in money has read this book.
It has you follow 9 steps and journey through your past, current and future life to get a better handle on your finances.
Everyday Millionaires (Buy On Amazon Here)
Written by Chris Hogan, it is a unique twist on The Millionaire Next Door book.
Hogan, who is a follow of Dave Ramsey, interviews millionaires and shares their stories with the reader.
You get first hand accounts and lessons of what to do to improve your finances.
This makes the book very powerful as it is easy to relate to.
Of course, financial literacy isn’t just limited to books.
You can read articles online and even watch programs and listen to podcasts to grow your knowledge.
Not only will this education help you now, but it will help you in the future as well.
This is because when the next financial disaster comes, you will be able to get through it easier because you have a better foundation.
#3. Build A Support Network
It’s never easy to go through a rough time.
But it is even harder when you don’t have anyone to lean on for support.
Because of this, it is important you build a support network.
This can be made up of close friends and family members.
They have to be people you can trust and feel comfortable with as you will be confiding with them your finances.
Tell them where you stand and what happened and ask for support.
You are not asking for monetary help here.
Just a shoulder to lean on or an ear to listen to you when you reach your breaking point.
The best people in your network will empathize with you and encourage you to push through.
You may even be surprised that your opening up to them will have them open up to you as well.
So put together a list of people you can trust and lean on for help.
#4. Focus Long Term
The next step to surviving a financial crisis is to look at your savings and focus on the long term.
It’s easy to get caught up in the moment.
We as humans are wired to react to short term pain or pleasure more than pain or pleasure that will happen down the road.
Advertisers know this and this is why we impulsively buy.
And the media now knows this too, which is why every story you read is breaking or the latest information.
We need to know now.
But you can’t look at your financial life through a short term lens.
You need to look long term.
In the moment, your finances are a hot mess and it doesn’t seem like there is a way out.
But there is.
As the economy recovers, so to will your income and you can begin to restore your savings or pay off credit card debt.
It helps if you mastered the first step of getting control of your emotions as they play a large role in this step.
It also helps to look back to the past.
Think of times that you struggled.
They don’t have to be related to your finances, any struggle will do.
Think about how you felt in the moment and how things turned out.
In most cases, life never follows the worst case scenario.
Use the power of the long term to help you navigate these tough times and you will get through them.
#5. Take An Inventory Of Your Financial Life
Now we move on to action steps when it comes to your money.
Your first step is to take an assessment of your financial situation.
Take a few minutes to write everything down.
Write down your current earnings and expenses along with your current bank balances.
Then break out any debt or loans you have and any upcoming large bills or expenses.
In order to get through this mess with the least possible damage, you need to know where you stand.
Don’t start making judgments about making it through.
You are only to collect the information now.
Once you have everything written down, give it a day or two before moving on to the next step.
Many times we forget about an expense or bill in the moment and by waiting, we give ourselves the opportunity to include everything.
You should also review your financial goals and your financial plan.
What goals were you trying to achieve? How will this impact them?
By taking these into account, you won’t face any nasty surprises down the road. Plus you can take action now to limit the damage.
And if you don’t have a financial plan, now is a great time to create one since you will have all the information you need to build it.
#6. Create A Working Budget
You now need to review your finances and create a plan going forward.
Total up your monthly earnings and expenses and see where you stand.
If you have more income than expenses, you are still in good shape.
And if your expenses are a little higher than what you earn, you can quickly fix this as well.
If your costs greatly exceed your paycheck, you have some work to do.
The first step is to look at non-essential spending.
This includes entertainment, dining out, hobbies, etc.
Depending on your income gap, you need to either trim these back or cut them out completely.
Once you do this, reassess your situation.
For some, you are back to even. For others, you have more work to do.
I’ll get into this in the next step.
#7. Trim Your Expenses
Now you need to really take a hard look at your expenses so you can reduce them to a point where you aren’t going into debt every month.
Many experts will tell you to keep looking at your small expenses and cut back on those.
But you will get to a point where you either can’t cut anymore or the cutting is going to make your life miserable.
I like to focus on some larger expenses you have as reducing these will have a bigger impact on your bottom line.
For starters, let’s look at auto insurance.
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The next step is to call your credit cards where you have a balance.
Ask them to lower your high interest rate.
This works most of the time, assuming you make payments when your bill is due.
They might try to offer you lower interest on purchases going forward, but you want a lower interest rate on your current balance.
This won’t get rid of your monthly payment, but it will lower the amount of interest you pay, saving you money.
If you think you will be going into debt over the short term, pick a card that doesn’t have a balance on it.
Call this creditor and ask for a lower interest rate on purchases.
Ideally you want to pay your bill in full, but if you can’t, it nice to have a lower interest rate here too.
When it comes to your other expenses, you need to get creative and in some cases, make short term sacrifices.
For example, when food shopping, reduce your grocery budget by cutting back on snack foods and other treats.
Maybe only buy ice cream instead of that along with cookies and crackers.
- Read now: Learn the best tricks to cut monthly expenses and save money
- Read now: Click here for over 115 easy ways to save money
For housing expenses, try to turn off the HVAC if the weather is nice enough. Or go outside during the day instead of watching TV.
By making changes to your routine, you can cut back on expenses without it feeling like you are going without.
You can even learn from people who survived the Great Depression and use some of their frugal living tips to survive.
#8. Grow Your Income
Now that you have reduced your expenses, you need to focus on building your income.
I suggest you do this even if you were able to balance your budget.
The reason for this is simple.
When you have different sources of income, you take on less risk.
For example, let’s say all your income is tied to your job.
If you lose your job, you lost all of your income.
Now life gets stressful as you have nothing coming in but you still have to pay your bills.
If you instead had a side hustle, you wouldn’t be as stressed.
Some cash would still be coming in helping you to meet your needs until you find another job.
Now, what should you do for a side hustle?
I am not suggesting you get a part time job at McDonald’s.
You need to find something you love to do. This way it won’t feel like another job.
There are all sorts of ideas out there too.
You just have to put a little thought into what your interests are.
Understand that this side gig isn’t meant to replace your current job.
It is just there to supplement it.
For example, when I was working a full time job, my side hustle was earning me around $10,000 a year.
I took this cash and put it all towards financial goals and paying off debt.
In a few years I had a nice down payment for a house without saving anything from my regular job for this goal.
That is why you need a side hustle.
If there would have been a financial catastrophe during this time, I would have used the money to help me cover my daily expenses.
So I encourage you to bring in multiple streams of income.
Just work a few hours a week and use that cash to help you get back on your feet now.
Then when things return to normal, you can use it to pay off debt or boost your savings.
#9. Take Advantage Of The Situation
Right now, you might be limited with how you can take advantage of a financial disaster.
But if you follow my tips, when the next one comes, you will be able to massively improve your finances quickly.
Here is what I mean by this.
Recently, interest rates were at historic lows.
Because our finances are healthy, we were able to refinance.
We knocked 5 years off our mortgage, lowered our monthly payment $300 a month, and will save over $75,000 in interest.
This is huge.
A reader wrote in and told me how she got her finances in order and when the stock market crashed, she put $25,000 she had in savings into the market.
She grew that money to over $60,000 as the market roared back.
Another possibility is to take this time to figure out what skills you need to increase your salary.
By using these months to educate yourself and make become more marketable, you will have a reason to ask for a higher salary when things get back to normal.
This is what I mean when I say you can take advantage of the situation.
When you have your finances in a healthy place, you can use these times as opportunities to get ahead.
Why do you think the rich keep getting richer?
One reason is because they have the means to invest when the market is down.
In 2008 when the housing market and global financial institutions were failing, they could buy houses and invest in the stock market.
In the years since, they made a ton of money.
You can be like this too and have options in both good times and darker times.
All you need to do is put in the work to get yourself to a better financial place.
While you won’t look forward to a financial mess, you won’t stress out about it.
You will see it as a chance to move your finances forward.
Finally, during times of struggle, the United States government sometimes provides assistance.
But you should not sit around waiting for this.
They are notoriously slow to act and there is no guarantee the help they offer will be for you.
Instead take action yourself and if you do get help from the government, treat it like a bonus to help you get ahead.
#10. Learn And Improve
The last tip for surviving a financial disaster is to learn from it and grow.
While it is important to grow as a person, I am talking specifically about your finances here.
I mentioned earlier about financial literacy, but there are other things you can do as well.
This could be the wake up call you need to finally build your emergency fund to cover unexpected expenses.
Or this could be the sign that you need to pay down your debt.
When your financial security goes away, there is added stress to the stress you are already dealing with on a daily basis.
But you can limit this added stress by taking the time to improve your finances.
Think about it this way.
Imagine you get your financial house in order. You have a solid emergency fund built and you have minimal debt.
The next time financial trouble happens, you will be frightened at the start.
But then you will think about it and realize that your finances are in good shape to handle the situation because you prepared for the economic downturn.
While others who didn’t plan ahead will be dealing with unimaginable stress, you will be taking each day is it comes, without much added stress.
As great as this fantasy sounds, it can be your reality.
You just have to be willing to take the steps today to get your finances in better shape.
Below are some excellent resources I’ve written to help you succeed.
- Read now: 7 steps to building an emergency fund even if you can’t save
- Read now: Commonsense steps to getting out of debt for good
- Read now: How to grow your own money tree
- Read now: Learn 16 habits of the wealthy
I encourage you to take the time now to start improving your finances.
While you won’t dramatically change your financial life overnight, you can start taking the steps so in the future, you are on solid financial ground.
These are scary times for many people.
But with a little common sense and effort, you can survive any financial hardship with minimal damage.
The keys are to stay calm, look long term, and take advantage of the situation.
If you can do this, you will find that periods like this aren’t as stressful as they used to be because you have financial security.
And the result is you can keep living your life without much worry.