Financial shocks come in many different forms: An unexpected medical bill, house repair or job loss are among the typical ones. The reasons for financial shocks may be common, but recovering from them can be unexpectedly challenging.<\/p>\n
\u201cThese things happen once or twice over a financial lifetime,\u201d says Spencer Betts, a certified financial planner and financial consultant with Bickling Financial Services in Lexington, Massachusetts. \u201cThey can be pretty big, even for a relatively well-off person.\u201d<\/p>\n
To recover from a financial shock and to protect yourself from the impact of one before it happens, consider these guideposts from financial experts:<\/p>\n
Betts recommends using an\u00a0emergency fund\u00a0as a first line of defense against financial shocks. \u201cThe general guideline is to have three to six months of your expenses set aside,\u201d he says, adding that the money can be kept in an interest-bearing account so it continues to grow.<\/p>\n
If you don\u2019t yet have an emergency fund, then experiencing a financial shock can provide the motivation to start one as soon as you\u2019re able to do so. Barbara O\u2019Neill, author of \u201cFlipping a Switch: Your Guide to Happiness and Financial Security Later in Life,\u201d recommends participating in a savings challenge such as a 30-day, $100\u00a0savings goal\u00a0or trying to save $1,000 by the end of a year to get started.<\/p>\n
\u201cYou can get a taste of success now that so much has beat you down. You want to turn things around. Starting by saving small amounts at a time can help,\u201d O\u2019Neill says.<\/p>\n
Mary Carlson, president of the Financial Behavior Keynote Group, a speaking, consulting and teaching firm, says she encourages clients to separate emergency savings accounts into two categories: A \u201ccatastrophic emergency\u201d fund for major events such as job loss and death, and a \u201clife happens\u201d fund for things like house repairs and a larger-than-expected tax bill.<\/p>\n
\u201cWhen we start to label things what they really are, then we know what to use the money for,\u201d Carlson says. Otherwise, she adds, it would be easy to empty out your emergency fund for predictable expenses like car maintenance.<\/p>\n
Also see:<\/strong> 11 strategies to help you save on your mortgage<\/p>\n Immediately scaling back spending on\u00a0variable expenses\u00a0such as restaurant meals and retail purchases can help direct funds to recovering from the financial shock. \u201cYou can\u2019t change rent easily, but you can adjust how much you spend on going out to eat, travel, entertainment and clothes,\u201d Betts says.<\/p>\n \u201cIf you can\u2019t pay for everything, you\u2019ve got to cover the basic needs first \u2014 food, shelter, utilities \u2014 then the things that will bring consequences, like your car being repossessed,\u201d O\u2019Neill says.<\/p>\n If you are struggling with those basics and looking for local resources to help, such as food banks, the website 211.org can help you find them.<\/p>\n Related<\/strong>: Consumers are still getting shocked by unexpected medical bills, despite new law<\/p>\n If it\u2019s still tough to\u00a0pay your bills, Betts recommends calling your lender or service provider. \u201cYou aren\u2019t going to be the first person to say, \u2018Oh no, I overextended myself, can you do anything to help me with these payment options?\u2019\u201d he says. Companies can sometimes offer payment plans or later due dates for bills.<\/p>\n Carlson says that in some cases, banks and credit unions will work with customers on short-term loans with a 0% or low interest rate to help them get through a challenging period or unexpected expense. \u201cBe proactive and say, \u2018Look, I can\u2019t make this work.\u2019 They may have options for you to work out a plan,\u201d she says.<\/p>\n Read:<\/strong> Struggling to pay your medical bills? Be careful if you\u2019re offered a \u2018medical credit card.\u2019<\/p>\n Giving yourself a deadline to get through your financial shock, whether it\u2019s paying off a specific expense or finding a new job, can also make it easier to power through a difficult period, Betts says. \u201cIf you have a precise timeline, whether it\u2019s 70 weeks or 13 months, then you can say, \u2018OK, I\u2019m counting down the months, the weeks, the days. This isn\u2019t something I have to do forever, but for a short period of time, and then I\u2019ll be done with it,\u2019\u201d he says.<\/p>\n Sharing that goal with friends and family members can open new avenues of support as you try to reduce spending during that period, he adds. \u201cIf you\u2019re talking to someone you are comfortable with or who might also be going through a crisis, you can go through it together, and it\u2019s easier,\u201d Betts says.<\/p>\nCut back on unnecessary expenses<\/strong><\/h2>\n
Ask about hardship options<\/strong><\/h2>\n
Create a timeline and find support<\/strong><\/h2>\n