While financial hardship is something no one wishes to encounter, they can unfortunately arise. Contrary to popular belief, financial problems are not always the result of irresponsible spending.
In reality, many people experience financial hardship due to factors beyond their control.
Instances of Financial Hardship
A range of life changes can impact someone’s finances. Below are some examples of financial hardships:
- Personal or family medical conditions or trauma.
- Reduction or permanent loss of income.
- Escaping domestic abuse or ending a toxic relationship.
- The death of a partner or spouse.
It’s also possible that someone currently experiencing financial hardship had only just started to build financial security when they were hit by a catastrophe that completely derailed their plans. Financial hardship can be extremely distressing. They can even impact your emotional and physical health, accelerating the ageing process.
Do any of these instances of financial hardship apply to you? If so, this post will help you cope with these challenging circumstances and move forward as quickly as possible.
Early Warning Signs of Financial Hardship
Identifying the cause of your financial stress early on will help you take the first steps towards resolving it. Here are some signs that you may be experiencing financial hardship:
- Reling on credit to cover everyday expenses.
- High or maxed-out credit card balances.
- Turning to high-interest debt, such as cash advances or payday loans.
- No savings or emergency fund.
- Regularly paying overdraft or late fees.
- Low credit scores due to high debt-to-income ratios and missed payments.
- Unable to make minimum payments.
Recognising these warning signs is one of the first steps in developing a financial plan to turn things around.
7 Essential Tips To Get Through Financial Hardship
That said, the following crucial tips will help you develop strategies to rebuild and regain control of your finances.
1. Adjust Your Budget To Weather Financial Storms
If you’re facing financial hardship, it’s essential to adjust your budget to reflect changes in your income. For example, if you’ve lost your job or experienced a significant income reduction, you may need to budget for an irregular income.
No income? Relying on debt to survive?
Budgeting is even more crucial in this situation to minimise new debt. Once you have a clear picture of your income and outgoings, you can create a debt repayment plan to implement when your financial situation improves. This way, you’ll be ready to hit the ground running.
Additionally, you should adjust your budget to account for any recent large expenses. While you may not be able to pay these off immediately, understanding your spending is essential.
Prioritising your basic needs
Food, medication, a secure home, essential utilities, and transport – should be your top priority. By reviewing your budget, you might find areas where you can cut back or eliminate spending. This will allow you to redirect funds to more pressing expenses.
2. Inform Your Service Providers of Financial Hardship
With many people working from home, losing essential utilities like electricity, water, or the internet is the last thing you need. To prevent this, contact your service providers as soon as possible to explain your situation.
Many providers are willing to work with you and can arrange payment plans before disconnection. By being open about your circumstances, you can also avoid additional stress from late fees or accounts being passed to debt collectors.
3. Explore Lender Hardship Programs
If you’re in debt, your lender may offer financial hardship programs to help you rebuild your credit. These programs are typically available for student loans, credit cards, auto loans, and other debts. You may also qualify for rental or mortgage assistance.
Hardship programs can include interest waivers, reduced payments, or payment deferrals. However, it’s crucial to understand the details of any program before agreeing to it. Specifically:
- Any fees associated with the hardship program.
- The specifics of the payment arrangement.
- Whether a lump sum payment is required at any point during or after the program.
You may need to provide documentation of your financial hardship, such as a difficulty letter. This letter should clearly explain your financial situation and its impact on you.
4. Negotiate Past-due Bills
Many people with unpaid bills are afraid to address them. On the other hand, some believe there’s nothing they can do about debt in collections.
To clarify, there’s no need to be scared and you’re not powerless when dealing with past-due debts. The worst that can happen is a refusal. Ignoring overdue bills can also damage your credit rating in the long term.
Even with past-due or charged-off debts, it’s worth trying to settle them. You might even be able to negotiate the removal of negative comments from your credit report. In some cases, they might even write off part of the debt.
Just be sure to clarify any agreement, including what will be reported to credit bureaus.
5. Find Extra Income With A Side Hustle
If you have spare time, earning extra money through a side hustle or part-time job can be a lifesaver during financial hardship. A temporary side gig or part-time role can provide a much-needed boost without being permanent.
Remember, there’s no shame in taking on extra work. You could work part-time in retail, customer service, or delivery, or try freelancing or working from home.
You’ll need to be extra vigilant in ensuring your earnings cover your financial commitments and bills are paid on time. The last thing you want is to work long hours only to see your money disappear.
6. Avoid Payday Loans
Payday loans might seem like a lifeline when you’re desperate for cash, but do everything possible to avoid them. Their high fees and interest rates can trap you in a cycle of debt.
If you’re still employed, check if your employer offers salary advance loans. This could be a more sensible option than a payday loan.
7. Don’t Give Up If You’re Facing Severe Financial Hardship
As mentioned, financial hardship can be caused by many factors. The good news is that you can overcome them and rebuild. So, keep trying and don’t give up.
It will be tough, and you may experience a range of emotions, but you can get through this. Be kind to yourself, ignore criticism from others, own up to any mistakes, and move forward.
Severe financial hardship can be overcome!
Follow these steps to help you navigate your financial challenges. It will get you back on track and could even help protect your credit score.
While focusing on improving your finances, you can also set goals for personal growth. Remember, even the darkest nights are followed by dawn. You can do this!
