Dealing With Financial Setbacks

This post was written by Chris. He is a twenty-something battling his way out of more than $150,000 in debt. You can read more about him at Money Relationship.

When my wife and I decided to get out of debt, we went at it full force. We felt like nothing was going to stop us. However, almost immediately, financial troubles began to pop up. They weren’t necessarily large, but they were putting a damper on our extreme dedication to get things rolling. For example, my car needed new brakes, rotors and registration ($1000). My wife needed a small amount of surgery ($300), etc., etc. It just kept adding up and it felt like we were getting nowhere. After dealing with those setbacks, I’ve thought about some things that we did wrong (and right) in dealing with them. I’ve broken them down into some tips for dealing with financial setbacks.

Don’t Make Excuses

Over the past few months, I’ve realized that I made a lot of excuses for not paying down as much debt as possible. For example, every time we ran out of cash in our grocery envelope, I thought it was OK to just take it from somewhere else (the debt envelope for example). I figured, eh, what’s one month, we will get it rolling next month. That excuse seemed to pop up almost every month. Maybe one month we needed the extra cash for car expenses and the next we needed it for something else. All I can say is, stop making excuses and start getting angry at your debt.

Have a Small Emergency Fund

Everyone knows the importance of emergency funds. They’re there in case you have a financial setback or lose your job. Having a small emergency fund while in debt insures that if you do have a small financial emergency, you won’t have to accumulate more debt to handle it. Our emergency fund is set at $1,000. It’s a simple, round number that we feel comfortable using. You can make yours whatever you feel comfortable using. I think Frugal Dad actually used a $3,000 emergency fund while he was getting out of debt. Before you start paying off your debt, get an emergency fund set up. It will save you a lot of pain in the long run and it will prevent you from adding on to your debt.

Save Elsewhere

Something that we continued to do even when we had financial setbacks was spend elsewhere. I mean, we had $50 in our clothing budget, so we spent it on clothes. Looking back, we should have rolled that $50 into our debt snowball and postponed the enjoyment of clothes shopping for a month. Would we have gone crazy if we didn’t spend that for one month? No way. When you have financial setbacks, find other ways to save money. Maybe you shop at the discount grocery store that month or brown bag it the whole week. Why not pick up some overtime at work or a side job? These small things can make financial setbacks easier to handle.

Refocus and Get Moving Again

Once the setback is in your rear view mirror, it’s time to refocus and get back into gear. After our setbacks, we really started to attack our debt. We managed to pay off our $1,500 Best Buy credit card in 2 months. It just angered us so much knowing that we could have had it already paid off and we would be almost done with another debt. But, things happen and you just deal with them.

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