One of the most frustrating and emotionally grating experiences is when you are forced to deal with a significant financial setback. Whether you are struggling with a home foreclosure, the despair of a recent divorce or even the embarrassment of bankruptcy, financial setbacks can be an uphill battle that may seem unbeatable. But while debt may be cutting into your expected lifestyle, don’t despair. You can overcome a financial setback with planning and execution. Here are a few tips and resources to help you recover from a past bankruptcy, divorce or other setbacks.
Getting Past Bankruptcy
Bankruptcy can be demoralizing and embarrassing, but is actually more common than you might think and can happen to anyone. In fact, statistics from a study at the University of Michigan show that at least one in eight Americans will contemplate filing for bankruptcy, which is around 13% of the population. Remembering you are not alone will take away from the personal shame.
Also, rather than succumbing to guilt or shame, try to use this as a learning experience rather than a personal downfall. Analyze how the situation got out of hand, and try to use this knowledge to bounce back and avoid bankruptcy pitfalls down the road.
Reestablishing Credit After Divorce
Divorce is a painful process and can deeply affect you emotionally and financially, but there are some tips that can at least help maintain a strong credit score in this tough time. First, you are going to want to reestablish credit in your own name apart from your former spouses. Make sure to get the three credit reports mandated by the government site AnnualCreditReport.com. This will help you avoid any mistakes on your credit account. Also, get rid of joint credit accounts that you shared with your former spouse, and try to keep up on your credit payments. If you don’t have credit in your name, now is a good time to apply for a second credit card that requires you to pay cash up front.
Get Professional Help After Major Credit Problems
One of the best solutions to failed investments or financial setbacks is to seek the advice of professional consulting. A good place to find financial advisers and monetary help is at the Financial Planning Association or the National Association of Personal Financial Advisers. Wherever you go, assistance from HUD-certified counseling agencies can help you set a strong plan for financial recovery.
Work on an Emergency Fund After Financial Mistakes
Not to be confused with a rainy day fund, an emergency fund should be a separate savings account that should save between $3,000 to $10,000. This fund is not to supply a one-time need in a tough time, but instead acts as a back-up account to see you through longer periods of monetary struggle, such as a job loss or marital separation; it provides a cash-flow cushion when it’s really needed. By keeping an emergency fund before periods of financial grief, you can also be better prepared for a financial blunder, whether it’s an investment that tanked or even an expensive identity theft. Keep in mind that a fund this large will take a while to accumulate so make sure to start setting aside some money as early as possible to build towards buffering financial storms. It is a wise investment to maintain your future accounts.
Financial setbacks and struggles can be incredibly difficult to deal with, but remember that even these tough times can be overcome. Just keep in mind these tips to rebuild your credit build several smaller savings accounts, and above all else don’t feel guilty. Financial troubles will at one point or another attack the best of us, and it is up to us to work towards recovery. The faster you’re ready to recover, the faster you can bounce back.