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Getting back on track after a financial crisis

Whether it’s having hundreds of dollars in fees to pay or having thousands of dollars in credit card debt the strategies you use to deal with any type of financial crisis does make a difference to your long term financial well-being. 
What is the first step in dealing with any financial concern?
Start with an objective review of the situation. Don’t be doom and gloom but you also don’t want to be overly optimistic either. You need to have a clear understanding to develop the best plan to overcome a financial crisis.
Once we have a realistic view of the situation, how do we solve it?
Most financial situations are going to require difficult choices and will always require that a spending review be developed.  A spending review is the only tool that can help you develop a plan to solve your financial dilemma.
Understanding what we spend doesn’t usually get us out of debt, what else will be needed?
It is true, a spending review only tells you what you have been doing to get yourself in this situation. Now the hard part starts with developing a budget that helps you find extra income and reduce expenses.
What is the number one mistake that people make in a financial crisis?
Without question it is not having a long term view of the situation. The long term perspective insures that financial decisions to solve the short term problem don’t create more financial issues in the future. Usually these issues are even greater than the short term situation.
What are strategies that can have long term negative consequences?
The most frequent financial mistakes involve retirement savings. People will either suspend all savings, borrow against their 401k or the most detrimental move, cash out their 401k savings.  All three of these have varying degrees of long term consequences that can be very difficult to overcome.
What is another trap to avoid when solving a financial situation?
Almost everyone wants to find the quick and least painful way to solve a financial problem. Unfortunately if you are in a financial crisis there generally is not a quick and painless option. It will require significant financial behavior changes.
What are the best ways to avoid getting into a financial crisis?
Starting early with a budget and having a long term financial plan are the building blocks. Adding in protection such as insurance, emergency savings and controlling debt are also important concepts to employ.  Some people will still experience a financial crisis but these steps will help lessen the impact and provide a solid foundation to build upon as they work to overcome any negative financial situation.

Posted: 7/15/2016 with 0 comments

Categories: Money, Money Matters, Planning, Spending

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