Starting Over After a Financial Catastrophe

fresh startBeing broke isn’t always fabulous, as many people found out after the 2008 global banking crisis. Some people lost their jobs, some lost their homes, and others lost their entire retirement nest egg. If you’ve experienced a major financial setback, you don’t have to feel defeated. With time, discipline, and determination, you can make yourself solvent again.



1. Protect Your Home First

When you take a major financial hit, keeping a roof over your head is your first priority. Talk to your bank, preferably someone who specializes in helping troubled homeowners, and find a realtor that works with troubled borrowers. Take any job that will help you pay your mortgage, even if it means taking a second job, until you get back on your feet.

At the same time, be realistic about whether you can save your home. If you need to downsize, do it immediately to minimize your costs.

2. Be Aware That You’re Vulnerable

Unfortunately, many people in this world make money by preying on vulnerable people. You might see advertisements or get phone calls about credit repair schemes, or someone might offer you an insider investment.

If you want support with rebuilding your credit, don’t sign up with an agency that collects a large fee for negotiating with your creditors, and avoid “get rich quick” game plans. If you become the victim of a financial scam, don’t feel ashamed. Contact the police so that you can protect others from a similar fate.

fb egg3. Take Advantage of Free Resources

If your financial loss is due to an accident and you can’t afford an attorney, there are many no-fee, no-win services, such as, that charge nothing unless they collect a settlement or judgment for you. For credit repair, look for free advice from a charity, such as the Consumer Credit Counselling Service (CCCS). Some financial institutions also offer free assistance for their members, so ask your brokerage or bank for assistance.

4. Save Just a Little Bit of Money

If you’re broke, you might feel as though you can’t afford to save money. You might also feel that giving up a small treat just to save money, like a night out at the pub, isn’t worth it when you’re already depressed. However, saving just a little bit of money, even just £30 per month, can make a big difference in your morale. Try saving some money for just a month or two. You’ll discover that it’s a bigger boost than you’d get at the pub.

fb free5. Accept What Is

The worst thing that you can do after a financial catastrophe is to pretend that nothing’s happened. If you keep living your current lifestyle instead of cutting back, you’ll spend yourself closer to bankruptcy. Take a cold, hard look at financial reality by asking yourself these questions:

  • What expenses can you cut? After a big disaster, trimming back your cable bill or eating out less isn’t enough. You’ll need to examine whether you can afford not only your current home but also your car and other major expenses, like your children’s private school or college tuition. Downsizing might feel depressing, but it’s often the best thing you can do immediately after a crisis.
  • What income can you generate? A big financial setback might mean retiring later than you planned, or it might mean taking a job that you previously thought you’d never have to take. You might also have to sell a major asset, which can feel painful if you worked hard to earn it. Remember that it’s probably a temporary setback, and good times will come again.
  • What will the future really look like? If you’ve lost a great deal of money, you might never live the same way that you lived in the best of times. Taking spontaneous vacations or even just spending money without worrying about your bank balance might be luxuries from another era. Adjust to your new financial reality. Even though you might grieve for your losses, acceptance is the key to building your new future.

6. Forgive Yourself

In many cases, a financial catastrophe comes from circumstances beyond your control. However, if you’re beating yourself up about not being prepared — or maybe if you made irresponsible decisions — avoid living in the past. Learn from your mistakes, and stay focused on the future. It might not be what you expected, but you can still find fulfilment and happiness.

About the Author

Financial professional and online entrepreneur, I'm best known as The Financial Blogger. I want to make money because I like enjoying life the way it should be; with a lot of great food and wine! I also love to spend time with my lovely wife and 3 kids!