A Step-by-Step Guide to Rebuilding After a Financial Setback

Picture this scenario: Your boss calls you to his office. You were expecting a promotion after ten years of dedicated service. Instead, he lays you off, saying the company needs to downsize due to lower industry demands. Naturally, you’re distraught. You try to pull yourself together, putting on a brave face for your colleagues. As you pack your belongings and listen to everyone say how much they’ll miss you, you grab your car keys, bid your see-you-laters, and head down to the parking lot. You approach your car, get in, shut the door, and let out a sigh of disappointment. But hey, “I’ll be okay,” you say to yourself. You start the engine, but uh-oh, it’s not working! You try again to no avail. Your jalopy has been acting up for weeks, and it finally gave up today (of all days). You let out another sigh. “Can today get any worse?”

Sometimes, it can feel like the universe is going against you on purpose. From job loss to your car breaking down in the same hour–it’s overwhelming. On top of today’s distressing events, you have bills to pay and close to nothing in your savings account.


What Is a Financial Setback?

A financial setback is an unforeseen event that can lead to stress, anxiety, and uncertainty about the future. Unfortunately, in today’s fast-paced and technology-driven world (especially with AI taking over jobs from humans), financial hiccups have become a common reality for many. The global economy, job markets, and personal circumstances can all play a role in causing financial hardships. However, facing a setback does not define your financial future. What matters is how you respond and take action to overcome these challenges.

Related: 5 Financial Problems Affecting Americans (With Solutions)


How to Recover From a Financial Setback

Bouncing back from a financial drawback can be difficult, but anything is possible with the right strategies, mindset, and support. Here, we have compiled valuable insights and actionable steps to help you navigate tough financial times.

Disclaimer: The practices shared below only serve as foundations to rebuild financial stability. We understand that every person’s situation is unique and that there is no one-size-fits-all solution to a financial loss.


Step 1: Try to maintain a positive mindset

Although financial setbacks can be emotionally taxing, adopting a positive mindset is crucial for overcoming these challenges. Instead of dwelling on how you could’ve prevented this situation, focus on the opportunities ahead. Blaming yourself will only make you feel worse, slowing your progress and preventing you from emerging stronger on the other side.

Don’t get us wrong–it’s perfectly okay to spend some time grieving. But try to focus on your goal of bouncing back. Recognize that mishaps and setbacks are a normal part of life, and nobody is immune to financial difficulties, not even millionaires.


Step 2: Get organized

Once you’ve cooled down, it’s time to get planning and put your game face on. Allot some time to list and organize your monthly bills (rent, mortgage, car payments, electricity, internet, credit cards, etc.) and other essential expenses (food, drinking water, toiletries, insurance, etc.) to make overseeing and managing your finances easier. Compile them in a folder for quick reference.


Step 3: Review your financial resources

Your bank accounts, investments, and insurance – evaluate the financial resources available to you. If your setback is due to a medical emergency, a vehicular accident, or a property break-in, make sure that your insurance provides coverage for everything. If you have an emergency fund, now might be the time to dip into it.


Step 4: Create a budget and stick to it

Now that you’ve organized your bills, essential expenses, and financial resources, compute how much money you need weekly instead of monthly. Set a budget and avoid breaking it.

Pro tip: Contact your lenders or creditors before bills go into collection. Some might be willing to work out a temporary revised collection plan. Here’s a letter template you can edit and send to your creditors.


Step 5: Cut unnecessary expenses

When facing a financial setback, you also need to review your spending habits and identify areas where you can cut back.

Unless you have enough in your budget for little luxuries, consider cost-effective alternatives to discretionary expenses. Unleash your inner chef instead of dining out, be your personal barista instead of buying from a local chain (this is how much money you’re spending on coffee houses each month), and cancel barely-used subscriptions. The general rule is if you can live without it, you don’t need to spend money on it (at least not right now).


Step 6: Find new or additional sources of income

The only way to recover from a financial setback is to boost your income or start earning money again (if you’re unemployed). Explore full- or part-time job opportunities online or, if you have the means, invest in income-generating assets. For example, you can diversify your earnings by learning about and investing in stocks and bonds. Doing so establishes passive income streams and paves the way for future financial security.


Step 7: Seek emotional support

Countless others are and have been in similar situations as you. In 2022, only 10% of Americans bounced back from COVID-19 financial losses. Joining support groups or online communities – where individuals with similar experiences gather – may help you cope with financial stress and gain helpful advice. Engaging with others who overcame financial disasters may also inspire and empower you to pick up the pieces.

Alternatively, consider sharing your challenges with your partner, family members, or friends you trust. Open communication can lead to practical solutions and emotional support.


Step 8: Learn from the setback and adjust your goals moving forward

Earlier, we asked you to maintain a positive mindset and refrain from dwelling on the past. Now that you’ve made some progress toward bouncing back, it’s time to reflect on what led you down this financially vulnerable path. Did you fail to realize the importance of having insurance? Did you struggle to control your spending habits? Was the cause inevitable, much like the initial half of our introduction?

Use your insights to adjust your financial goals and life plans. Get insured, build an emergency fund, set budgets, control credit card use, and prioritize home and car maintenance. Be open to altering your strategies and reexamining your priorities as circumstances change.


Trusted Luxury Goods Buyer and Collateral Lender in Phoenix, AZ

Take back control of your finances with Biltmore Loan and Jewelry’s support. If you require financial assistance, we provide cash offers for high-value assets and same-day collateral loans in Phoenix, AZ. To get started, request an online appraisal here or bring your luxury goods to our office in Chandler or Scottsdale. We are determined to help you bounce back from a financial drawback.