21 Jul

How to Bounce Back from a Personal Financial Crisis

There is no agreed upon definition of what constitutes a “personal financial crisis.”

A few examples might be:

  • Taking a pay cut with a different job
  • Unexpected repairs to your home or car that aren’t covered
  • Credit card debt that is eating up your income and not allowing you to save
  • You’re facing bankruptcy
  • You or your spouse has been laid off

Rocky Mountain Law Enforcement Federal Credit Union understands that a personal financial crisis is personal to you. However, we have a few suggestions of ways to tackle a financial setback that are widely applicable – whether the crisis was of your own doing, or beyond your control.

  1. Try to recognize if your emotions are taking over. It sounds hokey but positive thoughts lead to positive actions, while negative thoughts usually lead to negative action. If you have negative feelings about what has happened, you are likely to make a decision based on an emotion like fear, shame or anger.

Our attitudes towards money are shaped early in life, or develop without having much formal education. Everyone knows someone who seems to be constantly plagued by money problems.

People who believe that money is something within their control are the ones who become more successful in how they manage their finances.

  1. Look for pro-active solutions and don’t give in to the fear of making the same mistake or another financial setback. One antidote to fear is as much research as possible. Before starting to look for work, do your research and determine what you need to be earning in a new job to support your lifestyle. If there is some way you can increase your skills or better your negotiation techniques to secure a higher salary – do so. In the short term, think about what you can immediately cut from your monthly budget. Simple things like eating out less can help you get through a tough time.
  1. Check out a few books about money. – You’re busy – we get it – but if you have a few moments each day for social media – you can skim a few of these books.
  • Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence by Vicki Robin
  • The Total Money Makeover by Dave Ramsey
  • Start Late, Finish Rich: A No-Fail Plan for Achieving Financial Freedom at Any Age by David Bach
  1. Pare down a few of your non-necessities.

A few examples are: eating out at restaurants, movie theater tickets, a gym membership, outdoor gear.

Alternatives: Use coupons to eat out (restaurant.com, Groupon). Watch movies and TV on Amazon Prime, Hulu or Netflix or go to a cheap theater like Elvis Cinemas in Denver. Rather than a gym membership, explore free or low cost fitness apps on your cell phone or move along to free videos on Youtube.com like the Fitness Blender series. To save money on shopping, borrow items when possible, or buy used or from outlets.

  1. Be cautious about credit counseling companies. Credit counseling is an alternative to bankruptcy. These companies have you pay them and they in turn pay your creditors, having negotiated a payment plan and schedule. It’s not all bad but you should do your research first.

Advantages:

You avoid filing for bankruptcy.

You consolidate your bills into one monthly payment, for a period that lasts usually three to five years.

Your credit score should stay the same as when you enroll.

You’re forced to follow a strict monthly budget and live within your means.

Cons:

Reports from researchers show a 50/50 success rate.

Most lenders will not lend to you until your counseling period ends and you have re-established some credit. This will take a few years.

Similar to bankruptcy, credit counseling may impact how potential employers view you.

Nobody is born with superior financial knowledge. It is a learned skill and one that takes assessment and constant practice. RMLEFCU has dedicated personnel to help you in a financial crisis. You may call (720) 458-6660 to learn more. We also offer an in-house financial planner, Deborah Wilson, who can be reached at 720-855-4128. Call to schedule a free consultation and gain peace of mind.