7 Ways to Bounce Back From Financial Disaster

A money crisis is tough, but everyone falls down at some point – it’s getting up that matters. Here are the key steps on the road to recovery.

These are uncertain times. Jobs aren’t as dependable as they once were, and a serious illness can devastate your finances.

Even people who are well-prepared can make mistakes or encounter misfortunes that ruin their finances. It can happen to the best of us.

If it does, remember that this is not the end. Instead, it is the beginning of something new. People bounce back from disaster all the time.

Following are seven tips to help you regain your financial footing.

1. Accentuate the positive

Corny? Maybe a little. But make no mistake: Keeping your attitude upbeat really works. So does staying in the present. You’ll want to learn from your mistakes, but rehashing them endlessly keeps you from moving on.

In the same way, worrying about the future robs you of time and energy.

2. Seize control

Learning precisely where you stand in a crisis is painful. But there’s also relief in knowing what you’re up against. You can’t dig out until you know how deep your hole is. So, take the following steps:

  • Get a grip by tracking your expenses.
  • List all the bills you have to pay — rent or mortgage, utilities, insurance, groceries, car payment, gas and whatever else you need to cover to keep going. Add them up. This is the basic amount you need each month. Put your wants aside for the moment.
  • Make a stripped-down spending plan. For now, include crucial bills only.

3. Get professional help

Pride has its uses, but paralyzing you isn’t one of them. If you hit obstacles you can’t get around, don’t waste time being stuck. Reach out to people with the expertise you need.

A trustworthy credit counselor, for instance, can negotiate lower rates and a debt repayment plan with your creditors, taking bill collectors and pressure off your back.

Find accredited credit counselors. Their advice is free, and debt repayment plans should not cost more than $50. Get any agreement in writing before paying a cent. Don’t hand over money before you’ve received services.

4. Beware of crooks

Panicked people in financial distress are a juicy target for fraudsters. Credit repair schemes are notorious for fraud. Start now to repair your credit yourself — for free.

When it comes to credit problems, time is your friend. In seven to 10 years, even negatives as severe as foreclosure and bankruptcy drop off your credit reports.

5. Exercise

Exercise has a surprising ability to keep your mood up, energize and focus you, and move you forward. In this TED Talk video, author and psychiatrist John Ratey explains how “physical exercise turns our brains on.”

6. Safeguard your housing

Call your landlord if you’re renting, and ask if you can make smaller payments for a few months until you can get back on your feet.

If you are a homeowner, call the mortgage company right away. Don’t wait to get into trouble. Most lenders have foreclosure prevention programs to help homeowners in crisis. The Federal Reserve also explains how to proceed with a lender.

7. Find additional income

While figuring out where life will take you next, you’re going to need money to keep the furnace on and groceries in the fridge. Tips for generating income include:

  • Check with local schools to ask how to become a substitute teacher. Not all schools require teaching credentials.
  • Launch a pet-sitting or pet-walking business.
  • Start working from home. Get ideas by reading “10 Tips for Finding Legitimate Work From Home.”
  • Consider house-sitting. Keep your rates competitive to get your business off the ground. Or do it free to get free housing. Here are three sites that offer to connect house-sitters with homeowners:
  • Ask at schools about jobs as a bus driver, temporary janitor or kitchen aide.
  • If you’re handy, set yourself up in business doing home repairs. Get cards printed up and post them on bulletin boards at grocery stores, hardware stores and community centers. Put your name out there for free on your local Craigslist (under “services”).
  • Here are 50 more ways to scare up cash and “8 Weird Ways to Make Extra Money.”

Share your experiences of bouncing back from a crisis by discussing them in our Forums. It’s a place where you can swap questions and answers on money-related matters, life hacks and ingenious ways to save.

Stacy Johnson

It's not the usual blah, blah, blah

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  • Candy

    I got divorced after 36 years of marriage. My lawyer tried his best, and I believe he thought the settlement was a good one. I was to receive half of my exes pension fund plus enough to pay off all marital debt from that fund. I believed that the taxes would be paid by my ex. After I received my settlement and bought a very necessary vehicle and put 12% down on a house, I then had to start over with furniture and appliances, etc. I did well until my two children needed help. Then the hammer fell. I was responsible for all taxes, after all. I was declared uncollectible by the IRS for the 2012 tax year. However, the hits kept coming. The house I bought was a foreclosure, as is. The air conditioner went out last July and I was told it would cost $800 to fix. I will not have air conditioning this summer, either. My daughter lives with me and is working her tail off in a call center to try to pay half the living expenses and her student loans. Although graduating with a degree, she can’t find a well paying job in her field, or any job in her field! I just had my taxes prepared and I owe another $5000 to the IRS and State. We are starting a consolidation plan this month and have a new plan in place, but it’s tough. We parked one car and are sharing the other. We don’t have cable and I have given up my phone. I am diabetic, and even with the savings we’re still having trouble and I can’t afford my medication. Is there something else we should do, from what you’ve read here?

  • Rick Chumsae

    We’re all different, That fact should send a resounding message to all of us that using #3 in the article – get an advisor – is a critical first step to forming solutions to your complicated life. Maybe a better question is “how do I find a trustworthy and effective counselor”.

    Every one of the other points will help but it may take an advisor to to help you put it all together and create a recovery plan for you and your daughter.

    Best wishes on your success.

  • N_Jessen

    Another key point is that people are often more likely to get stuck in a rut of despair if they lack a strong, positive social connection. Feeling alone with your troubles can make things worse. So for those having difficulty, and/or those who might be able to help in an unobtrusive manner, it’s good to reach out. Even if it means just lending an ear.

  • Nik @ Midlife Finance

    When financial crisis strikes, getting stuck in that situation will ruin everything. Don’t fret and instead find ways on how you can rise up from your financial disaster. There are a lot of ways people earn money today and you just have to look and try. Start by asking friends and relatives. I know they will lend a hand to help.

  • Y2KJillian

    Reply to Candy below:

    1. get thee to the library and get Andrew Tobias book, “The Only Investment Guide You’ll Ever Need” (any edition) and read the part about “defensive investing,” or cutting corners.

    2. Get “The Millionnaire Next Door” and read as much as you can. The ideas of how to live proudly on “nothing” are invaluable. There are other books like this; they won’t get you more money but the first step here is, as you said, a plan to spend a lot less.

    We have never had air conditioning. It’s not the worst thing that can happen to you, as you well know.
    3. See if the library has any copies of the video, “Extreme Cheapskates”–don’t copy those people, but learn, learn, learn that living an un-standard lifestyle is OK. Doing without is OK. And there are LOTS of ways to do it.

    4. Are you on the various programs that can help you in your area? Medicaid? Obamacare? If your income is low enough, the plans can be virtually free. I found one at our income level for $11 a month. Seriously. It helps pay for MY diabetic medications! Swallow your pride and seek out help. Ask everyone you talk to for further referrals, and make those calls. There’s a LOT of help out there, but you have to start finding it and be willing to take it.

    5. Library again…Get the book, “He’s Just Not That Into You” to help you deal with your strong feelings about your ex-husband. I know you wanted him to pay more, but he wasn’t willing and you can spend a lot of heart trying to make it happen in your mind or emotions, but in the end you need to find a happier place for your feelings, and this book is incredible at helping you face reality. It’s short and a good read. The movie is NOT a substitute at all. QUITE different.

    Best luck to you; we’ve been on food stamps, commodities (huge blocks of cheese and bags of rice with rocks in them), we’ve paid “interest only” on our house, we’ve lived with only one car for many years (I would say, sell the 2nd car and figure out how to make do, possibly)…we once had to sell our car, our tent trailer, our garden shed, and a host of miscellaneous things we’d worked hard to buy due to medical bills…use Craigslist if you do have online capability or use it at the library for free things and to post things for sale (it’s free to post them, and you can have people contact you by phone…)

    This gets easier the longer you keep at it and the more clever you get…as does the ability to drive, as we do, a 20-year old car painted with a sponge roller and a can of $8 Rustoleum. At first it felt weird, but after a while, who cares? It’s still a car! Better than half the people on earth have!

    Things really can (and eventually will) get better if you stay strong and adult.


    • Great advice, Y2KJillian! Thanks a lot for sharing it. I’ve read two of the three books you mention, and one of them, Your Money or Your Life, was part of the inspiration for my first book, Life or Debt, which I wrote back in 2000.

  • LagunaLady27

    Bouncing back from a real financial disaster (try owing over $300K, having no job, no home and no car) takes years. I did numbers 1, 2, 3, 5 and 7 above, but on steroids. I put 60% of my income into eliminating debt and rebuilding my retirement fund (which had gone into a business venture, bad idea). I lived on the rest. Television was my only recreation. I retired in 2012, due to health issues. I still had some debt and no savings. But I am now completely debt free and am rebuilding my emergency fund. I have a good pension and my health has bounced back too. Life is good.

    • SuzieQ

      It is good to hear a happy ending story. You set a good example for so many.

      • LagunaLady27

        There is another lesson in this. I now never trust anyone who suggests I do anything that might impact my financial security. I learned that I am a terrible judge of character. I just stick to my plan.

    • Baltimore48

      You are an inspiration!!!

      • LagunaLady27

        Thanks. I learned that being super frugal was the only way to dig out of my hole. Luckily, I was stubborn enough to stick to my plan. I once had to explain it to a credit card company. They were freaked out (and wanted to increase my interest rate) by my carrying a fairly high balance at the time, but once they knew I had a plan, they relaxed.

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