Are you currently facing a big problem with family finances? Nobody wants to be in a financial disaster. If you even find yourself in one, you want to get out of it and you want to do it quickly.
While this is a natural reaction, you might want to change your perception about this. Because having a negative attitude about what is already a disaster will not help you change anything. If, like millions of Americans, you are still struggling to recover after the Great Recession, you might want to take a look at how you are reacting to the whole crisis.
The truth about your financial crisis
Here’s the thing: everyone goes through a financial disaster at some point in their life. Now your reaction to that crisis will have a big effect on how your life will turn out. If you react to it in the wrong way, you might end up in an even bigger disaster. If you react to it positively, then you might learn something new from your situation.
Looking at the current statistics in our country will not really help you in being hopeful about financial recovery. An article published in About.com regarding the US Economy revealed that the total debt in the country continues to rise. The credit card debt in May 2014 is at $872 billion – a rise from $870 billion in April. The loans are $2.32 trillion in May which increased from $2.30 trillion in April. This increase continues to disable a lot of American families because the increase in debt, specifically involving credit cards, is believed to be caused by late payments, lack of emergency funds and savings.
When it comes to financial problems, we usually think that earning more will get you out of it. While that may help you with the debt or payments that you need to make, it will not alleviate your situation in the way that it should.
6 common reactions to a financial problem
It is important to know that in any financial disaster, you have to react to it the right way in order for you to turn it into something beneficial in your life. As difficult as that may be in your current “crappy” situation, it is not impossible.
According to an article published on PsychologyToday.com, you can turn any crisis into an emotional threat or a challenge – depending how you choose to react to it. This will highly depend on how you control your emotions. The article revealed that your emotions are the heart of your response to any financial disaster. It can either be an obstacle or your source of strength to overcome your situation.
Understanding the different emotions that you will feel will help you in recovering from a financial disaster. That is because you will learn how to deal with each and every one of them. While we usually react to situations differently, we usually go through the same 6 reactions after a crisis. How we deal with each of them will determine how fast we can move forward.
Here are the 6 reactions that you need to go through as you personally deal with your financial problem.
- State of Shock and Denial. The first reaction is usually shock and closely followed by denial. When you confront a problem for the first time, it is only natural that you show disbelief. Sometimes, even if we know the situation, being faced with the actual problem can be disconcerting. We never really know how big the problem have become unless we lay it all out. These reactions will usually delay the inevitable pain of knowing that you did something wrong in your life.
- Point of Depression. Once you get over the feeling of shock, next come that sinking sense of depression. When it dawns on you that the financial disaster is real, it can really pull you under. Knowing that you made a mistake that led to this bleak situation is one thing. Trying to wrap your head in the reality is something else entirely. Admitting defeat is never easy and if you do not prepare for this reaction, you will lose it. Try not to stay here too long because the longer you feel depressed, the more you will be unable to act on the problem.
- Phase of Acceptance. You should ideally breeze through the first two and go to this phase immediately. This is the first step to being proactive about your financial disaster. Once your depression is over and you have accepted the reality of the situation, this is when you can finally start to move forward. Unless you have accepted the mistakes and the problem, you can never really start the recovery process. You can find it easier to accept your situation if you try to see the good in the bad situation. Here is an interesting and light-hearted video about what you should do when things around you are falling apart. Marie Forleo discusses how you should react to a disaster in your life – which is actually applicable in any type of crisis – financial or not.
- Stage of Analysis. Once you have accepted the financial disaster, you can now concentrate on moving forward from the problem. But before you can do that, you have to analyze what led you to this particular scenario first. Be honest about what really happened. Find out how you can got into this financial crisis. Then, identify what you did wrong and what you should have done differently. Some people skip this part over but it is an important step in your road towards recovery. If you fail to identify the mistake, then you might see yourself in this same situation again in the future.
- Time for Rebuilding. Once you have identified the root of the problem, you can start to plan out how you will improve your finances. Will you require a debt relief program or should you just start earning more? Should your plan involve a change in your lifestyle and spending habits? These are all part of rebuilding what you have lost during the financial disaster.
- Process of Fortification. Finally, you need to undergo the process of fortification. With what you have gained in the number 4 step, you can use that knowledge to fortify your finances to make sure that you will never be put in another compromising financial position again. Do not end with rebuilding. You need to make sure you that this is the last rebuilding that you will ever make.
How to rise from a financial slump quickly
Although rising from a financial crisis is difficult, it is something that you can do. It just takes a lot of discipline, self-control and even a bit of reflection about how you had been living your life. Do not think that it is the end of the world. You will always have hope to recover from a financial disaster as long as you are willing.
Once you have gone through the 6 reactions, you need to focus on maintaining certain habits so you can keep yourself from the mistakes of the past. In truth, going through a financial problem is not so bad – at least if you look at the lessons that you have learned because of it.
According to the Economist.com, Americans are spending less on unnecessary expenses after the Great Recession. They learned their lesson and they have identified that certain expenses have contributed to their financial fall.The average spending per family, from 2007 to 2010, fell by 3.1%. Since the average prices have risen by 5.2%, the article believes that the drop in spending is actually 8%. That is not so bad for a nation who has a reputation for overspending.
There are techniques that you can do to stay away from financial ruin and here are three suggestions from us.
- Build up your emergency fund. This reserve money will help you get out of unexpected situations without borrowing money.
- Investing your extra money. This is the proactive way that you can grow your money. Any extra money that you have that is outside your emergency fund should be invested. This is your way of setting up your money so it can earn you some extra income.
- Spend your money wisely. In the end, it is not about how much money you are earning. Staying away from a financial disaster is best done by using your money wisely. Do not let your overspending lead you to another crisis.