Many people have been in a situation where they got in over their head for one reason or another. Maybe it was a divorce or being laid off or the onset of a global pandemic. No matter what the cause, all hope is not lost and you can recover.

I’ve been there and while it isn’t pleasant, there is always a light at the end of the tunnel. With hard work, discipline, and a bit of foresight, you can get yourself back on the path to financial well-being.

I can’t promise that it will be easy but I can guarantee that course correction is within reach. If you are willing to make some tough decisions, you can persevere in the face of adversity. Keep reading for my top tips on how to rebuild your finances!

Take a Moment to Reflect and Put Things into Perspective

It can be very tempting to succumb to fear and panic when everything goes off the rails. It almost feels natural. But that is the least effective thing you can do in the face of a crisis. Take some time to compose yourself and when you are calm, take stock of your situation and begin to start focusing on solutions. Only then will you be able to begin making progress.

Evaluate Your Financial Obligations Versus Cash Flow and Prioritize

Write down what you owe and to whom, as well as documenting your cash on hand and average monthly income. Determine the difference between what you need to pay your bills and what you have coming in. You may be able to get a short-term forbearance or late payment forgiveness from some of your creditors by being proactive. Ignoring the problem will only make it worse. You may have to prioritize secured debt before unsecured. Secured debt includes mortgage and car payment (where there is some form of collateral against your loan). If you default on secured debt, you could lose your home or car. However, falling behind on your credit cards could lead to being sued by your creditors, so don’t ignore those, either. Be transparent with your lenders. They would rather get something from you, rather than nothing and may be willing to work with you on a short-term basis until you have your finances under better control.

Take on a Side Hustle

A side hustle may not be glamorous but it can absolutely save you from destitution if you have experienced a loss of income or other financial hardship. Companies like Uber and Lyft allow you to go out and make money that you can cash out the same day. Immediate access to your earnings can be crucial when you are scraping by. You can work virtually unlimited hours at rideshare driving and many other side hustles. If you are persistent and mindful of the income gap you need to bridge, you may be able to dig yourself out, largely with extra income from various secondary endeavors. But keep in mind that you must save for taxes. Uber and Lyft do not make those deductions for you. Wondering how to get started as a rideshare driver? Click here! Insert link.

Create a Budget

A budget can change your life. We are more inclined to recklessly spend money if we aren’t holding ourselves accountable or taking the time to figure out where our hard-earned cash is going. Not having a budget may work for you in the short term but it can eventually lead to financial hardship or worse. Once you have put together a budget, you will know exactly how much you need to stay afloat and can begin to dig yourself out of the hole you are in. Not sure how to go about making a budget? Check out my post on that very subject right here. Insert link.

Start an Emergency Fund                        

Establishing an emergency fund is one of the most important things you can do to avoid winding up in a situation where you have to rebuild. An emergency fund is there to keep you from getting derailed when the unexpected happens. A well-stocked emergency fund can mean the difference between hitting financial rock bottom and being able to ride out the storm. Having an emergency fund is like expecting the unexpected. If you’re not sure how to go about building an emergency fund, check out my article on that very subject right here. Insert link.

Avoid Panic-Inspired Stock Dumping

If you have investments in the market that you’ve taken a loss on, do everything in your power to avoid selling them in a panic. The market has a way of bouncing back and you are much better off weathering the storm (if you can). If you absolutely must sell something to make ends meet, try to offload stocks that you haven’t taken a major loss on.

Focus on Rebuilding Your Credit

If you have taken some damage to your credit score, don’t beat yourself up. You are only human and you are not alone. The important thing is that you take proactive steps towards bettering your financial future. As I mentioned earlier, starting an emergency fund and creating a budget will help keep you from ending up in the same situation down the road. There are worse things that a couple of late payments on your credit report. Moreover, derogatory marks become less meaningful with the passing of time. If you have demonstrated the responsible use of credit for an extended time period, negative marks become less damaging and eventually fall off (after seven-years).