Doing the right thing doesn’t always guarantee results. You may begin planning early for retirement, set savings aside for emergencies and make investments only to have a crisis wipe out your best-laid plans.
Crises — from job losses to prolonged illnesses or loss of a spouse’s income as a result of death or divorce — could force you to lean heavily on your savings or investments, which eventually either set you back at the starting point or, worse, burden you with debts.
If you’re in this situation, you must plan how you can recover as soon as your situation improves. Going back in black or above water is your first goal, of course, but you should not overlook the need to build some good cushion of savings and investments. Here are a few points to keep in mind.
Get help
If your crisis has ended and you’ve returned to a situation where you are not in an emergency, plan for recovery right away. Based on how big of a mess your financials are, you may need to work with a professional, like a debt-consolidation specialist or financial adviser. Professionals, who are legitimate and resourceful, could help you recover quicker and begin to build some savings.
Your goal is to get an overall understanding of your debts, expenses and needs to maintain financial health going forward. Some specialists may even work out new repayment plans with your creditors, and help you put a plan for how to pay off your debts without accumulating new ones. Debt consolidation and settlement are complex topics, and you may not get the best deal going straight to your creditor, so it may be worthwhile to work with someone who can advocate on your behalf.
If your situation isn’t complicated and all you need is some planning to pay off manageable debts, and begin savings and, eventually, investments, you could do it yourself. Only keep in mind that you must learn from the past’s mistakes. If your stocks plunged or your real estate investment failed, you may reconsider your ability to make sound financial and investment decisions. Getting professional advice could help you as well.
Moderate expectations
If you have drained your savings or lost a big investment, you must be realistic about your future expectations. Retiring in your fifties may no longer be in the cards, even if you have just landed a fantastic high-paying job. Until you have a plan in time to see how you will recover from your debt, and how to return to financial health, stay cautious and frugal.
In addition, make sure that you communicate these expectations to your dependents or life partner. Expecting everything to go back to how it used to be may be unrealistic. So set new plans for what the future might hold for you and your family, if no other crisis hits you while your new financial planning meets its goals.
Plan better for crises
Although some emergencies may be beyond your control, try to make the best out of the learnt lessons. For example, buy insurance that covers major issues, like disability, illness, liability and life. Think of what could have helped you through your tough times or least reduced the impact of your loss. In some cases, the answer is nothing. In others, it could be a better health insurance policy, a bigger cushion of savings or a well-paying job.
Money may not be a goal in your life, but financial security should be. Find ways to secure your current situation and avoid future pitfalls. Although having another crisis hit right away may seem unlikely, you never know. A second strike while you’re financially vulnerable could be detrimental, so shield yourself with sound financial planning to get back on your feet.
The writer, a former Gulf News Business Features Editor, is a Seattle-based editor.
Recover from a financial crisis
Get professional help and advice
Learn from your mistakes
Plan for the future
Rethink your crisis planning
— R.O.
