No matter how well you plan, there are some things that hit your life—and your finances—really hard.
Divorce, medical emergencies, job loss, and other major events can have a devastating impact on your financial situation. When you’re going through such a financial disaster, it’s easy to think it’s all over. But here’s the reality: people do get through these events and rebuild stronger and smarter than before. We know, because we’ve sat across from clients going through all of these things and helped them find their way forward.
Here’s what you need to know about handling a financial disaster. For more information, check out attorney Ben Matthews’ podcast, Debt Sucks.
Acknowledge the new normal and adjust accordingly
The first step is simple in theory but brutal in execution: face the financial reality, in detail. Now is not the time for wishful thinking or ballpark guesses. Write down all of your debts, income, and expenses, down to the dollar. For instance, in a job loss scenario, make sure you know whether you qualify for unemployment benefits and, if so, exactly how much they’ll cover. Likewise, if you’re going through a divorce, look at the actual balances on all of your individual and joint debts; don’t just take your spouse’s word for it.
You need to see the numbers, because otherwise any shortfalls will end up on a credit card, and your immediate financial crisis becomes a long-term debt crisis. Once you have a realistic assessment of what’s going on, it’s time to make some tough decisions.
That leads to our next point: make those tough decisions. You have to redefine your short-term and long-term financial priorities in light of the new normal. Usually, in the wake of a financial disaster, your short-term goal will be survival: paying for housing, transportation, food, medical care, and other essentials. But in the long term, your crisis might actually be an opportunity, a way to another path you wouldn’t have taken otherwise. For example, losing your job could mean you have the chance to start the business you always dreamed about—once you get on a stable financial footing.
Secure the essentials and don’t worry about your credit
Again, in the short term after a financial crisis, your focus is on survival: Lock down the basics, including food, shelter, transportation, and (especially in a divorce) access to your own money. Cut back on things you don’t really need, like subscriptions and luxury purchases. Then, make a debt plan that adjusts for your new reality:
- Divorce: Figure out which debts are joint and which are individual. Remember, creditors don’t care what the court said: if your name is on the account, they will come after you.
- Job loss: With no paycheck, keeping up with debt payments can be impossible. You need to make a survival budget and decide which debts to prioritize when you have an income again.
- Health crisis: When your health goes south, your finances can get hit from both ends: you have co-pays, deductibles, and other out-of-pocket costs, and you may need to work fewer hours to rest or receive treatment. Again, you need to decide which debts you have to pay and which ones can wait.
In the short term, when survival is on the line, it’s okay to hold off on paying unsecured debts like credit cards, personal loans, and medical debt. Don’t worry about your credit score; keeping a roof over your head and food in the fridge comes first. You can rebuild your credit after you’ve taken care of the essentials.
Getting your finances back on track with professional backup
Once you’ve survived the storm, you can start to rebuild momentum and move toward getting out of debt. Use the “piledriver method”—throw everything you can at one debt at a time, celebrate when it’s paid off, and then roll those payments into the next debt.
Here’s the key: don’t do it alone. Talk to an expert who knows how to handle the type of situation you’re in. If you’re going through a divorce, even if it’s “amicable,” get legal advice to help you avoid making serious and costly mistakes. Likewise, if you’ve lost your jobs, talk to a financial adviser or credit counselor to determine what benefits you qualify for and what steps you might need to take. If your health crisis was caused by an accident, you may need a personal injury lawyer or workers’ compensation attorney.
If your financial crisis has turned into an overwhelming debt crisis, that means you might need to talk to a bankruptcy attorney. We’ve helped countless people get out from under debt, avoid wage garnishment and foreclosure, and get their lives on track. This isn’t weakness; it’s the smart move to rebuild after a disaster with the help of an expert.
If you’re dealing with overwhelming debt, we can help
Most people who end up in financial crises are there because of factors beyond their control: medical expenses, job loss, divorce, and so on. No matter how you ended up deep in debt, there is a way out.
With the help of an experienced attorney, bankruptcy can give you the financial reset you need to start moving forward again. Talk to an experienced lawyer at Benjamin R. Matthews & Associates, LLC today.
"Punctual, resourceful, and helpful. Ben is very no-nonsense but genuine and nice. Thank you for being so great." – Amy Y., ⭐⭐⭐⭐⭐