Unexpected life events — such as job loss, business failure, divorce, catastrophic illness or disability, or even the death of a spouse or partner — may bring financial challenges that can disrupt even the most carefully detailed financial plan. With the right mindset, solutions and strategies to help, however, you may be able to nurture a sense of resilience.

In other words, bouncing back from personal economic hardship isn’t just about cutting expenses. It’s about making smart, strategic choices that help you feel more confident about your future. From reassessing your budget and managing debt to finding new income opportunities, below are a few proactive steps that may help.

Assess your financial situation

Once you address the personal impact of a difficult life event, it’s important to assess the actual financial impact on you and your family. Facing the full extent of the damage is the first step toward identifying solutions that might help advance your recovery efforts.

Begin by creating a simple list of all outstanding debts, noting when they are due. Review the current interest rate on any credit cards or loans you may have. Then, list all funds available to help you meet those obligations: savings, any upcoming payments due to you, or refunds to which you might be entitled. You should also note any emergency funds you may have, and include assets such as property, retirement accounts or investments.

»Tip: Some outstanding debts may not be your responsibility. For instance, in the case of your spouse's death,¹ you will need to determine what marital debts are also yours, such as money owed on joint credit union, bank or investment accounts, or loan payments on jointly owned property (e.g., cars, homes or land).

Develop a recovery plan

Again, after thoroughly assessing your current finances, you can develop a realistic recovery plan that addresses your financial needs and goals.

Depending upon your unique situation, you might want to consider prioritizing budget management, debt consolidation or settlements,² and debt repayment. You may need to consult a credit counselor or attorney to organize any possible redress such as reduced or waived fees, payment assistance, or even refinancing existing debts through consolidation or new terms.

Other strategies to consider may depend upon the origin of your specific financial hardship(s), but they might include:

• Making use of social services or government support
• Maintaining health care coverage, particularly if you lose your job:³ Explore how COBRA, a federal law that protects you through your employer for 18 to 36 months, and provisions within the Affordable Care Act (ACA) may be of use.
• Utilizing flexible spending accounts (FSA)
• Exploring financial assistance programs offered through hospitals for certain kinds of medical debt
• Staying mindful of how credit card debt can impact you in the long-term: Although they can be helpful in some instances, say after a layoff or loss of a family member's income, you'll want to incorporate ways to repay any debt into your budget moving forward.
• Seeking out experts with knowledge relevant to your situation: These professionals might include credit counselors, employment agencies, or qualified financial advisors. 

Review your status — and progress — each month to determine if your approach is working. If necessary, reassess your plan and adjust over time.

»Tip: Be careful, however, as fraudsters and scammers may be more prone to target financially vulnerable people.

Manage expenses better through budgeting

While your recovery plan may include payment assistance or refinancing, consider ways to control your spending during this time. Track all your expenses⁴ and scrutinize all your discretionary spending. Cutting back on unnecessary expenses helps direct more of your money toward your comeback plan.

Your budget should include all basic necessities. Think housing, utilities, food and transportation. It should also reflect any payment assistance or adjustments you’re able to work out with creditors and lenders.

»Tip: Changing your spending habits can go hand-in-hand with budgeting. Save money at the grocery store by using coupons or store brands. If the need for any other necessary expenses occurs — like clothing or shoes for growing children — shop around for the best price or visit resale shops.

Don't wait too long to prepare for future financial setbacks

Although you may wish to prioritize paying off debt first, you might also want to consider preparing for other future financial hardships as early and as reasonably possible. Unforeseen personal challenges tend to be exactly the situations where an emergency fund⁵ can be beneficial.

It may even be strategic to have two kinds of emergency funds: one for typical life setbacks — think unexpected home or car repairs — and one for catastrophic events such as a death, sudden unemployment or natural disasters.

If you have concerns about your employment or health issues that may impact your income, evaluate whether you have enough set aside to help address economic hardships. How much you have in an emergency fund should reflect the expenses you will need to meet under whatever circumstances may arise.

»Tip: If you haven't added an emergency fund to your personal financial toolbox, getting started is important. You could also consider adding other cash reserves to your financial strategy.

Take care of your mental health

The stress of financial uncertainty can make it challenging to focus on the remedies necessary to bounce back from the difficulties you and your family face. It's important to take care of yourself mentally and physically during this time. Fortunately, many options are affordable.

Consult with a doctor, but regularly participating in outdoor activities like running or walking can help keep you in top physical condition. Keeping your emotions in check and your body in good shape can prepare you for the fight to recover from your setbacks. There are also support groups and online apps that address increasing stress and financial strains.

The takeaway

No one wants to think about experiencing a traumatic event or being in a financially precarious position. But no matter where you are on your financial journey, you can take proactive steps to prepare for the unknown. By starting to build your emergency fund or exploring life and long-term care insurance products, you can make future financial hurdles less challenging.

Contact the professionals at RBFCU Investments Group to learn about developing strategies to help you navigate life's opportunities and challenges.