How to Recover From a Personal Financial Setback

Financial setbacks inevitably happen, and if you find yourself dealing with a layoff, high medical expenses, or another setback, there are some steps you should take to start the road to recovery.

Assess your personal situation

First, assess the situation so that you know exactly what you are dealing with. Is this a one-time setback, or an ongoing issue? Is it temporary or permanent? Know exactly how much money you’ll need, and how much you have.

Analyze available financial resources

Determine what resources are available to you, both from your own accounts as well as insurance. If you are facing medical bills, have you made sure everything has been covered appropriately by insurance? If you’ve been laid off, look into Consolidated Omnibus Budget Reconciliation Act (COBRA) extended health insurance coverage, as well as unemployment insurance. Do you have an emergency fund? If so, this may be the right time to start using it.  

Set financial priorities

After you know exactly what your situation is and what resources you have available to you, you’ll need to set priorities. Go through your budget and determine if there is any opportunity to decrease costs, such as canceling or cutting back on cable.

Know which bills have to be paid immediately, and what things you can prioritize later. Just don’t be tempted to go without insurance – this can change a minor setback into a major one very quickly.

Create a personal financial plan

With your spouse, work through your budget and your bills, and decide how you are going to get everything paid. Is there opportunity to earn more or spend less? Know exactly how you’ll be spending your money over the next few months, and make a plan to track your progress.

Contact your creditors

Finally, if there are some bills you absolutely cannot afford to make minimum payments on, contact your creditors to work through payment options. You should make these phone calls before your bills end up in collections, because once there, your options are limited.   

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.