How to Bounce Back from a Bad Fall
The first thing to do after a bad fall is to recover as fast as you can and not overthink things.
THERE will be times in our life that our finances and spirit are put to the test. Our business and career start to boom but suddenly we get involved in an accident or suffer a severe illness that wipes out whatever is left of our savings.
Right after seeing the hospital bill, we may become depressed and demotivated to work harder. Perhaps that is normal as we are physically and mentally drained immediately after an operation or illness. It is alright to take the necessary rest first before embarking on the journey to financial freedom. The first thing to do after a bad fall is to recover as fast as you can and not overthink things.
Once you are fully rested and recovered, here are fifteen steps that you should take in order to bounce back successfully.
1. Assess the damage. List down the total financial setback you have experienced from the accident or illness. This will help you understand how much you had to withdraw from your retirement account or emergency fund. Hospitalization bills, even for a brief moment, are usually never cheap.
2. Re-create your budget. Develop a detailed budget that outlines your current income and expenses. Normally, the savings rate here only covers the retirement fund or emergency fund. Since you recently experienced a sudden large expense, the payment for that has to come from the existing income. Hence, one needs to identify areas where one can cut back expenses so that one can allocate the free funds towards replenishment of the emergency fund.
3. Set clear financial goals. Define your financial objectives in a measurable and quantifiable manner. Set a specific amount of money that you need to set aside to replenish your financial loss.
4. Prioritize building or rebuilding an emergency fund. Having readily accessible savings can prevent you from tapping into your retirement accounts in the future. Ideally, one should have around six to twelve months’ worth of expenses to cover via the emergency fund.
5. Have an HMO. Having a HMO (health maintenance organization) card can help cover a large chunk of the hospitalization expenses whether it is inpatient or outpatient.
6. Critical illness and life insurance. In the event the HMO coverage is not enough, having critical illness insurance might be able to help cover early stage of critical illness and late-stage illnesses.
7. Maximize your income. Although cutting expenses is a good idea, there is a limit as to how much expenses can be minimized. Even if one did not spend much, year after year, cost of goods will continue to increase due to inflationary pressures. Thus, one should always be on the lookout for opportunities to increase one’s income, whether through your current job, a side business, or investments.
8. Invest wisely. Do not fall for scams wherein a high interest is offered for nearly zero risk. Review and revise your investment strategy to align with your new financial goals and risk tolerance. Diversify your portfolio to manage risk or default.
9. Retirement account contributions. Once your emergency fund has been restored, resume contributing to your retirement accounts as soon as possible. Maximize contributions to take advantage of tax benefits and employer matching.
10. Debt management. Prioritize paying down high-interest debts, as they can impede your ability to save for retirement. Once debt is fully paid off, redirect those funds to savings.
11. Live below your means. This may be difficult to do especially if you have been used to a certain standard of living. Hence it is important to go back to step 1, which is assessing and accepting your current financial situation. If you continue to live in a certain fantasy, getting out of debt and reaching financial freedom may prove difficult.
12. Stay positive and patient. Bouncing back from a significant financial setback can be a slow process. Instead of dwelling on what is past and irreversible, one needs to maintain a positive and inspired attitude. Long-term success is built on numerous small successes.
13. Consult a financial planner. Oftentimes, one needs to get the insights from an independent individual who is interested only in your financial welfare. Seek the services of a third-party registered financial planner who can help you plan a bounce back financial plan.
Raymond Anthony Quisumbing is a book author and a Registered Financial Planner. His mission is to educate people as to how to best manage their personal finances in order to achieve their life vision.
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