Many people have been hit with “financial curve balls, and there has been a lot of bad news in recent months. If you have been struggling financially, you’re not alone. People have been affected by the craziness of 2020, and we’re only halfway through. This isn’t the first recession, nor is it the first time that we’ve had financial unemployment.
Here are five of the most common financial setbacks, along with some tips on how you can bounce back.
#1: Market Losses
At the beginning of the year, we saw some pretty terrifying drops. The market went down 35% in a single month, which is unprecedented. But it has happened before. So, how do you start digging yourself out? Volatility is part of the market. So if you saw your investment accounts and 401(k)’s go down dramatically, don’t do anything except evaluate your goals and risk tolerance. Are you still on track toward reaching your financial goals? Market volatility doesn’t mean permanent loss. So just because the market’s down, it doesn’t mean it will be that way forever.
#2: Pay Cuts
Many people have seen a pay cut, which can be a hard pill to swallow. And it highlights the need for a stronger cash reserve. You also need to look at how much money is actually hitting your account, which is called your net/net amount. If you don’t have a cash reserve, you need to think about how you can get one. And you may have to take some drastic measures. Free up any extra cash by all means necessary.
#3: Job Loss
When you’re going through a hard time, you never think it will be behind you. If you’re dealing with a job loss, it’s important to know your options. Can you file for unemployment? And you might be able to use the CARES Act, take money out of your 401(k), or withdraw funds from your IRA (which should only be a last resort).
#4: Supporting Family Members and Friends
You may not be doing as badly as your friends or family members, so you might be in a position to help them out. In these types of situations, you have to ask the difficult question. Can you really do this? You also need to make your intentions clear. Is it a loan or a gift? Either way, you need to understand what the expectations are. And you don’t want to destroy your financial situation to help others.
#5: Bad Financial Decisions
Regardless of the situation you’re in, you don’t want to make bad financial decision. This can include more than racking up credit card debt. Selling your investments based on emotion is a bad idea as well. Avoid making impulsive, short-term decisions, and remember that financial recovery takes time.
If you want more advice about how to improve your financial situation, feel free to get in touch with Trevor Shakiba at Shakiba Capital.