6 steps to recover from financial crisis

financial crisisWhether it be due to a divorce, losing a job, suffering uninsured damage to your home or the failure of a business, all of us experience some degree of financial crisis in our lifetime. While often distressing and stressful, a financial crisis can be easily managed, all it takes are these 6 simple tried and tested steps.

1. Come to terms with the situation

The first step to financial recovery is to accept your situation, when you do this you will be able to draw a line in the sand and start to recover. Perspective and positivity are essential, focus on the future and try not to dwell on the past as wallowing in you misery is not going to help you. Remember that you are not alone, many have suffered before you and they will again. Learn from your situation and move on.

2. Assess the damage

To plan your recovery, you must first know the extent of your financial difficulty. Sit down and work out how much money you owe, how much you have and how much you earn each month and the average costs of running your household. Organising these figures in a spreadsheet will make things easier and clearer. Now that you know your starting point, you can progress to the next step.

3. Work out your goal

The third step to financial rebound is to set yourself a clear target for the future. You need to know where you’re going in order to plan how to get there. Make sure your end goal is realistic and achievable, if not, you will feel worse when you don’t manage to fulfil it. Be sure that you can measure your progress, this way you will be able to adjust if you’re not on track.  Don’t be too general or too specific about your end goal.

4. Form your plan

Now that you know where you are and where you want to be financially, you can plan your route. Avoid a plan and a budget that is too restrictive, this will make you miserable and stressed and odds are you won’t be able to stick to it. Likewise, a plan or budget that is too flexible will mean that you will be stuck in your current situation for longer than needs be.

5. Put your plan in action

You know your starting point, your destination and how you’re going to get there but all of this means nothing without you putting it into practice. It seems obvious but up until now all you have done is think; now you need to act and take your steps on the road to financial recovery. It may feel like you have a long way ahead of you, but every step takes you nearer to your goal and further from your stress and worry.

Don’t give up!

6. Adapt and adjust

No plan is perfect from the outset so you may need to adjust it as you go along. Do not be disheartened if some budget or plan elements do not work as well as others, this is a learning process and all you need to do is tweak them so that they do work for you. The sooner you make these corrections, the sooner you will reach your target.

The information in this article does not constitute legal or financial advice. If you would like to discuss any of the above in greater detail, please contact your local Axis adviser.

Image Credit: Ben Hosking