U.S. household debt is at a record-breaking high of $18.2 trillion, with 45.2% of families carrying credit card balances. Unfortunately, with all this debt out there, financial setbacks are an inevitable part of life for many of us. Everyone deals with financial challenges at some point, like unexpected medical bills, job loss, or market changes.
However, it's not the setback itself that defines your financial health, but rather how you respond to it. With some smart financial decisions and help from Bonvenu Bank, you can navigate through financial setbacks and emerge stronger than ever.
Assess the Financial Setback
The first step in dealing with any financial setback is to assess the situation. Take stock of your current financial standing, including your income, expenses, debts, and savings. In some cases, it is easy to see why the setbacks happened but sometimes setbacks can occur through a series of subtle events.
Understanding your financial situation can assist you in creating a plan to improve it. This will also prevent you from making poor financial decisions in the future. Some questions to think about while assessing your situation include:
- What caused the setback?
- How much debt do you have?
- What are your immediate financial needs?
Create a Monthly Budget
In times of financial difficulty, having a budget becomes even more crucial. Now is the time to review your spending and focus on important things like housing, bills, and groceries. You should attempt to find ways to cut back on spending and identify areas where you can free up financial resources.
Examples of ways to reduce monthly spending include pausing or cancelling subscriptions/memberships, shopping generic brands at the grocery store, and eating at home. Use Bonvenu Bank’s online and mobile banking for budgeting and personal finance tools to help you see where your money goes each month and spot problem areas.
Build an Emergency Savings Fund
If they were to lose their primary source of household income tomorrow, 66% of U.S. adults would be worried that they wouldn’t have enough emergency savings to cover a month’s living expenses. Having an emergency fund acts as a buffer against unexpected financial challenges. If you don't already have emergency savings, start building it as soon as possible.
You can start small by automatically transferring money from your checking to your savings account on a regular basis. Ultimately you will want to save three to six months' living expenses in an easily accessible account for emergencies. This will help during difficult times. Bonvenu Bank offers the myStyle Savings Account and tools in our online and mobile banking where you can setup automatic transfers to savings accounts to make building your emergency fund easier.
Communicate with Creditors
If you're struggling to meet debt obligations because of a financial issue, the worst thing you can do is ignore the problem. Proactive communication can prevent the situation from escalating further.
Prioritize Debt Repayment
If you have high interest consumer debt, paying it down can help you solve ongoing problems with managing your money. You can use Bonvenu Bank’s Credit Card Payoff Calculator to come up with a plan to eliminate the debt. You can also find your full credit report listing all debts, monthly payments and debt utilization ratio, along with other credit report and credit score tools in online and mobile banking.
This will help you decide if you can use a DIY debt reduction strategy or should consider debt relief options.
Two DIY debt payoff strategies that are popular are:
- Debt Snowball Method: Focus on paying off your smallest balance first. Put all extra money toward one loan while paying the minimums on your others.
- Debt Avalanche Method: Focus on the highest interest rate first, then the next highest rate and so on.
If DIY debt payoff doesn't work, try consolidating debts or negotiating with creditors for lower interest rates. Creditors can work with you to implement a debt repayment strategy that aligns with your budget and financial goals.
Stay Positive and Flexible
Maintaining a positive attitude and remaining adaptable in the face of setbacks is essential for long-term financial resilience. Accept the reality of your challenge and work to handle it quickly. Understand that setbacks are temporary challenges and focus on what you can control instead of worrying about things like inflation and other economic activities that you can't change. Keep adjusting your strategies as needed and celebrate small victories along the way.
Facing financial setbacks can be daunting, but with the right approach, you can overcome them and emerge stronger than before. By assessing your situation, creating a budget, building an emergency fund, communicating with creditors, prioritizing debt repayment, and maintaining a positive mindset, you can successfully navigate through tough times.
Bonvenu Bank offers trusted advice along with savings accounts, financial calculators, and online budgeting tools to help you navigate your finances. Contact us or visit one of our Louisiana branches to get started.
