Financial downturns can happen to anyone, at any time. An interruption to income is a thought that nobody ever wants to entertain. Nevertheless, it is crucial to have a plan in case the unthinkable happens. 

A sudden expense or change in your income can have ripple effects not only on your finances but also on your daily life. You might need to make significant adjustments to your spending habits and lifestyle if you encounter any of these situations:

• Reduction in working hours or pay
• Sudden job loss or layoff
• Loss of income in the household
  

During these challenging times, it may be necessary to exercise financial resilience as you and your family work together to regain a sense of normalcy.

Building resiliency, especially when it comes to budgeting and covering your essentials, is a valuable skill. Like any skill, it requires practice and consistency to master.

Everyone faces hardship differently. However, by nailing down a few fundamental concepts regarding finances, it’s possible to weather the storm and build toward regaining stability. Here are a few strategies we recommend for building a robust financial resiliency toolkit.

Analyze Your Situation, Identify Your Expenses, and Adjust Your Priorities

The Federal Employee Education & Assistance Fund (FEEA) provides a thoughtful guide on managing financial hardship. First, it helps greatly to know what you are going up against so you can find meaningful avenues to address the issues. 

Review your bank statements and carefully examine your income and expenses. It may be helpful to break down your expenses and reevaluate your priorities by establishing a clear hierarchy. In some financial advice circles, this concept is also referred to as differentiating between “needs” and “wants.” An example hierarchy of financial needs might include:

• Housing
• Food
• Utilities
• Health
• Insurance
• Existing Debt 

Let’s say you use the above hierarchy as a guide. Any expense that can’t fit into any of the above categories can be considered a “want” and can therefore be excluded for the foreseeable future. Of course, there can be nuances to these categories as well. A nutritionally meaningful meal, for instance, would be a higher priority than running up a tab on a food delivery app.

Clever Girl Finance has a great breakdown on creating a “bare bones budget.” As times get lean, you may need to have honest conversations about your spending and determine what is necessary and what can be left out.

Take this time to reassess your spending and create a budget that focuses solely on essentials. This is your chance to get a clear, honest look at where your money has gone and what you can do to make your dollar go further. 

Maintain Good Debt Management Practices and Seek Assistance When Needed

During times of financial hardship, it may be necessary to cut back on certain expenses, such as subscription services or takeout. One category of expenses you do not want to ignore, however, is outstanding debts.

Debt is a wide-ranging category. It can include charges like:

• Mortgage payments
• Car payments
• Personal loans
• Student loan payments
• Outstanding credit card balances
  

Debts are financial obligations. Skipping or stopping these payments can hurt your credit score. Also, they can put you in an unfavorable situation with lenders and collection agencies. Missing loan payments can even result in repossessions and foreclosures. In essence, ignoring your debts can only compound any current hardships.

Making the monthly minimum payments on any loans should be a budgeting priority. As your financial situation improves, you can adjust how much you pay back to a level that’s more comfortable to you.

If you feel that you cannot make the minimum monthly payments, it’s better to get help rather than ignore the issues. Contact your lenders to discuss your situation and see if you can get temporary assistance.

Your financial institution may have options for certain loans you have with them. For instance, banks and credit unions may offer a “skip-a-pay” service that allows you to skip one or two months of payments without incurring penalties. 

Some credit card issuers may offer hardship programs. Organizations also assist with setting up debt counseling, relief, or consolidation to keep payments manageable.

What's most important, however, is getting conversations about debt assistance going as soon as possible. Ignoring outstanding debt can easily develop into significant financial hardship if the issue isn’t addressed. Contact your loan servicer as quickly as possible to create an actionable plan.

Take Time To Rebuild, Reflect, and Prepare

As you work through a financial challenge, it’s essential to have a plan and remain consistent in your approach. During this time, you’ll want to carefully monitor your spending and current income, and stick to your priorities.

Consider the ways that you can rebuild your savings. This could mean contributing back to your emergency fund before returning to old spending habits.

Exercising resiliency also provides perspective on old habits. As you rebuild, reflect on your financial situation and evaluate what things worked and what could be improved in case another hardship occurs. This can also be an opportunity to eliminate certain expenses permanently, freeing up money for the future.

Another aspect of building financial resilience is adjusting your lifestyle and habits to put you and your family in a stronger position. Many of the things we do daily can also impact our finances in subtle and even significant ways. Knowing this, it may be a good idea to adopt habits or explore avenues that can leave you better prepared in the future, such as:

• Building skills for career advancement
• Adopting positive driving habits or revisiting transit alternatives
• Changing attitudes towards food and takeout
• Conserving energy around the house
• Rethinking your relationship with credit
• Teaching children personal finance fundamentals
  

Even if you are going through a financial downturn, it’s important to remember that it is possible to keep moving forward. A good attitude, productive action, and consistency can go a long way in preserving your financial well-being. 

First Florida is dedicated to helping individuals establish a solid financial foundation. If you require assistance, know that help is nearby. You can start with a checkup. Our partners at GreenPath™ Financial Wellness offer resources and counseling to help you stay on track.