Personal Finance

Money at 30: When a “Rainy Day” Arrives — Rebounding from a Financial Setback

You’ve surely heard the term “saving for a rainy day” and how it’s been applied to the concept of having an emergency fund. So, what happens that that rainy day comes? That’s what I’m experiencing this week.

Long story short, my wife had to undergo surgery on her wrist last week — something we definitely weren’t anticipating. While everything went well medically, the procedure was, shall we say, a bit pricey even with insurance factored in. On the bright side, we should be able to make it out of this rut without incurring any debt. Unfortunately, the episode still represents a financial setback that we will need to work to overcome.

Whether you find yourself in a similar situation to ours or have suffered any other kind of financial blow, there are a few steps you can take to begin working your way back.

How to Recover From a Financial Setback

Be thankful, not regretful

Before we get into some of the steps for rebuilding your finances, it’s important to discuss some of the psychological impacts that financial hardships can have. Anger, resentment, loathing, and more can all be common depending on your situation. In our case, my wife and I have repeatedly been playing back the incident that led to her injury and thinking about all of the “what ifs” that could have prevented our current predicament — or framing it as a “$6,500 mistake.”

It probably comes as no surprise to you but this is not helpful! Yet, even though we all know we can’t change the past, it’s natural to dwell on it. Ultimately it won’t always be easy to forgive yourself or others for what went wrong, doing so will be necessary for moving forward.

What will be useful is to focus on being thankful instead. As I recently wrote, things can almost always be worse. So, while it may be cliche, “count your blessings” can still be good advice when processing your financial setback.

Reassess and reprioritize your goals

While we were able to cover our unexpected expenses thanks to our emergency/rainy day fund, now we want to be sure to replenish this reserve lest any other financial challenges await us ahead. Therefore it’s time for us to take a closer look at our spending and figure out what temporary changes can be made in order to build up our savings once again. This will likely also require us to move some of the other spendings we currently prioritize down the totem pole a bit.

Under normal circumstances, we’d be putting a portion of our leftover money aside with the intent on using it for travel. Similarly, as I’ve previously discussed, my wife and I make an effort to go out for “Together Tuesdays” once a week — and then there’s our Starbucks work dates that can add up week after week. I’ll admit that given the current environment I’m writing this in, it’s been much easier to let these expenses fall by the wayside as, well, since we don’t really have a choice. Still, this reprioritization would have likely come regardless of the current health crisis.

Outside of cutting back on the obvious, there are some other ways we might adjust our priorities in order to help us bounce back. For example, we currently overpay on our car payment in a bid to pay it off early. As a result, we’re quite a bit ahead and could technically skip a payment entirely if we needed (or we could just pay the proper amount for a few months). This isn’t something we necessarily want to do, but it could certainly be part of the conversation as we determine what sacrifices are worth making to get back on track.

Acknowledge your wins

Whether you’re paying down debt, working toward a savings goal, or making progress of any sort, it’s important to celebrate your wins. This will not only allow you to experience some joy amid your hard work but help keep you motivated.

So what does it mean to celebrate your wins? It depends. Obviously you don’t want to do anything that will hinder your financial progress but it could still be considered a “treat” or sorts — a night out, an item you’ve had your eye on, etc. Really, anything that will allow you to relieve some stress and get your ready for the rest of the road ahead.

Learn from your mistakes and missteps

Bringing it full circle, although reliving the past can hold you back in the moment, reflecting on it with some distance actually can be beneficial. Although my wife and I aren’t quite to that point yet, we can already see that perhaps going to the doctor when you think something is wrong is better than waiting until you’re sure something is amiss (yes, we’re still just learning this at age 34). As for you, who’s to say what lessons you may be able to take away with the advantage of hindsight? Take these with you and maybe just maybe it will save you some heartache in the future.

Setbacks are never fun but they don’t need to be the end of the world. Indeed, you can bounce back from these hardships — even if it may take some time. Once you stop blaming yourself, set a new plan, celebrate your progress, and take the lessons learned with you, you’ll be well on your way to not only recovering but emerging even stronger.

Also published on Medium.

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