Rebuilding After A Financial Setback: 5 Proven Steps to Get Your Money Back on Track
- Davina Jackson
- Nov 17, 2024
- 15 min read
Updated: Nov 25, 2024
Welcome to The Woman CFO – a space crafted just for you, where we embark on a journey of financial empowerment.
Life has a funny way of throwing curveballs when we least expect it - especially when it comes to money.
Whether it’s an unexpected job loss, mounting medical bills, a tough divorce, or even a business venture that didn’t pan out, financial setbacks can happen to anyone.
These moments are tough and can shake your confidence, disrupt your life, and leave you wondering how you’ll ever recover.
But here’s the truth (and good news): while financial setbacks may feel overwhelming, they don’t define you, aren’t the end of your story, and most importantly don’t dictate your future.
In fact, setbacks can be a powerful starting point for transformation.
Many women have faced similar struggles and emerged stronger, more financially savvy, and better prepared for whatever comes next. I did and so can you.
So, while rebuilding after a financial setback isn’t easy, it's 100% possible.
In this week’s blog post, we’re going to discuss how to navigate financial setbacks and start your journey to recovery. You’ll learn how to take control of your situation, rebuild your finances step by step, and create a future that aligns with your goals.
Most importantly, you’ll discover that every small step you take today can lead to big wins tomorrow.
Financial recovery isn’t just about paying off debt or saving money - it’s about reclaiming your power, your confidence, and your peace of mind.
Let’s start this journey together.
Are you ready? Let’s go!
Key Points
Recognizing and accepting your financial setback is the first step toward healing and regaining control.
Develop a clear, actionable plan to reset your finances, focusing on budgeting, saving, and managing your money effectively.
Tackle debt in a way that feels manageable - whether through the debt snowball or avalanche method - and focus on paying off high-interest debt first.
Adopt a growth-focused money mindset by reframing your beliefs around money and embracing a positive, abundant approach.
Set up systems and habits, like building an emergency fund and practicing mindful spending, to safeguard your financial future and reduce the impact of future setbacks.
Instant Gratification Zone: Skip to the Good Stuff
Financial Rebuilding Step #1: Acknowledge and Accept the Situation
Ignoring financial problems doesn’t make them go away.
In fact, avoiding the issue(s) often makes things worse. Bills pile up, debt grows, and the stress only multiplies.
That’s why the first and most important step in rebuilding after a financial setback is to acknowledge where you are and accept the situation for what it is.
This can be hard - especially when emotions like shame, frustration, or guilt are swirling around - but you have to swallow the pill no matter how bitter it tastes.
But by acknowledging your situation, you strip it of its power to overwhelm you. You shift your mindset from "I’m stuck" to "I can handle this."
Here are 4 steps you can use to help acknowledge, accept, and regain control of your financial situation:
Take Stock of Your Current Financial State: Start by gathering all the facts. Look at your income, expenses, debts, and savings. Write everything down so you have a clear picture of where you are. It may feel uncomfortable, but it’s a crucial step.
Let Go of Blame and Shame: Financial setbacks happen to everyone - yes, even the most successful people. But remember that life is unpredictable, things will happen, and setbacks don’t define you. Release the guilt or self-blame, and instead focus on what you can do next.
Validate Your Feelings: It’s okay to feel upset, scared, or frustrated. Allow yourself to process those emotions, but don’t let them paralyze you. Acknowledge how you feel, and then shift your focus to taking action.
The Power of Self-Compassion: As women, we often hold ourselves to impossibly high standards, feeling like we should have everything together all the time. But life isn’t perfect, and neither are we. Be kind to yourself during this process. Think of this moment as a learning experience rather than a failure.
Once you’ve accepted where you are, you’re ready to move forward with a plan.
Remember, rebuilding isn’t about perfection; it’s about progress. Acknowledging your financial situation will bring clarity and understanding of exactly where you stand financially.
So, breathe, roll your shoulders back and let the feelings of empowerment and hope wash over you.
Financial Rebuilding Step #2: Create a Financial Reset Plan
Once you’ve acknowledged where you stand financially, it’s time to take the next step: creating a financial reset plan.
Creating a financial reset plan puts you back in the driver’s seat, giving you control over your money and your future.
So, think of this as your roadmap to recovery aka a clear and actionable guide that will help you rebuild, regain confidence, and move forward with purpose.
Let’s talk details.
How to Build a Financial Reset Plan
1. Assess Your Financial Situation
You may have done this as part of acknowledging and accepting your situation, but let’s dig deeper and take a detailed look at your financial state.
Start by breaking your finances down into 3 main areas:
Income: How much money are you bringing in every month? Include all sources, like your job, side hustles, or any assistance you may receive.
Expenses: List all of your monthly expenses, including fixed costs (like rent or utilities) and variable ones (like groceries or subscriptions).
Debts and Savings: Note how much you owe and what savings, if any, you have available.
2. Set Clear Financial Goals
Next, you want to gain an understanding of what you’re working toward. Is it debt reduction? Making more money? Finally setting up your retirement accounts?
The point is to set goals that are realistic and actionable. For example, instead of saying, "I want to save more money," set a specific goal like, "I want to save $500 in the next three months."
Do this by breaking them down into short-term, medium-term, and long-term goals:
Short-term goals: Focus on immediate needs, like paying essential bills or starting an emergency fund.
Medium-term goals: These might include paying off high-interest debt or saving for a specific expense.
Long-term goals: Look ahead to financial security, like building a retirement fund or saving for a big life goal.
3. Create a Budget That Works for You
A budget is one of the most powerful tools for financial recovery - and is often where people struggle - so I encourage you to take your time and work through this carefully. Please be honest with yourself about what you need versus what you want.
Start by listing your income. Then, allocate it based on essential expenses, debt repayment, and savings.
Variable expenses, such as subscriptions, streaming services and entertainment, should be allocated last - as these are not key spending categories and can be reduced or eliminated to put money back into essential spend. Think of them as “wants” and not “needs” that must be paid.
Tip: If you find yourself struggling to create a budget, try the 50/30/20 rule as a guide. It’s simple to calculate and implement. And you can adjust the percentages as needed to fit your current situation.
50% for needs (housing, utilities, food)
30% for wants (entertainment, hobbies)
20% for savings and debt repayment
4. Build an Emergency Fund
It may feel impossible right now, but it’s important to start building (or rebuilding) an emergency fund.
It’s recommended to save at least three to six months’ worth of living expenses, but don’t stress if that feels like a huge goal.
Start with the allocated dollars set up in your budget or start small by aiming to save just $10 or $20 a week.
The goal is to create a safety net for when things happen (which they often do), so you can have peace of mind and protection from future financial setbacks.
Tip: Make saving automatic by setting up a direct deposit into a separate savings account. This way the money is moved without you seeing it - so you won’t be tempted to spend it.
5. Make it a Point to Track Your Progress Regularly
Your financial reset plan isn’t set in stone. It’s a living, breathing document that you can (and should) adjust as needed.
Schedule weekly or monthly check-ins to review your budget, track your progress, and celebrate your wins, no matter how small they may seem. Because small wins add up to big ones!
Financial Rebuilding Step #3: Address Debt Strategically
Debt can feel overwhelming, especially when you’re rebuilding after a financial setback.
But here's the good news: With a clear strategy and consistent effort, you can regain control over your finances and reduce your debt.
This means understanding your options, setting priorities, and staying committed to your plan.
Let’s dive in
Understand the Types of Debt You Have
Not all debt is created equal, and understanding the difference is key to creating an effective strategy.
Generally, there are two types of debt to consider:
Secured Debt: This type of debt is tied to an asset, like your mortgage or car loan. If you don't pay, the asset can be taken back.
Unsecured Debt: This includes credit cards, personal loans, and medical bills. If you fall behind, creditors can't take your property, but they can still damage your credit score and pursue legal action.
Make a list of all your debts, including the type, total balance, interest rate, and monthly payment.
This will give you a clear picture of where you stand and help you make smarter decisions moving forward.
Choose a Debt Repayment Strategy
There are a few common debt repayment strategies that can help you get back on track financially.
The key is to choose a method that fits your situation and motivates you to keep going. Here are the two most common:
1. The Snowball Method: This strategy focuses on paying off your smallest debt first. Once that debt is paid off, you move on to the next smallest one, gaining momentum as you go.
While this method doesn’t necessarily save you the most money in interest, it can feel rewarding to eliminate debts one by one and build your confidence.
2. The Avalanche Method: If you want to save money on interest, this method targets your highest-interest debts first.
It may take longer to pay off a smaller debt, but the overall cost of your debt will be lower, which can lead to faster financial recovery in the long run.
Both methods are effective, so choose the one that is the simplest to implement and aligns with your financial goals.
Negotiate with Creditors
If you're struggling to keep up with payments, don’t be afraid to reach out to your creditors.
Many lenders are willing to work with you to find a solution, especially if they see you're trying to manage your debt responsibly.
But before talking to your lenders, know your available options:
Lower your interest rate: Ask if they can reduce your rate, especially if you’ve been a customer for a while.
Request a payment deferral: Some creditors may allow you to delay payments for a few months, so you can focus on stabilizing your finances.
Set up a payment plan: Work with your creditors to create a manageable repayment schedule that fits your budget.
Being proactive shows you're committed to paying off your debt, and it can also give you some breathing room to focus on other financial goals.
Avoid Accumulating More Debt
While paying down your existing debt is crucial, preventing more debt from building up is equally important.
This is very important as we go into the holiday season when it’s easy to rack up debt on holiday travel, experiences and gift giving.
So, before you reach for a credit card or consider taking out a loan, consider these strategies to avoid taking on more debt:
Cut back on discretionary spending: Review your spending habits and see where you can trim back. For example, reduce impulse purchases, skip unnecessary subscriptions, or find lower-cost alternatives for entertainment.
Stop using credit cards: If you’re in a position to pay down debt, the last thing you want is to keep adding to it. Consider leaving your credit cards at home or freezing them temporarily until you're in a stronger financial position.
Use cash or a debit card: A simple way to avoid adding to your debt is to use cash or a debit card for your purchases. This ensures you're only spending money you already have.
Set Realistic Debt Payoff Timelines
While it’s tempting to want all debts paid off quickly, setting an achievable timeline that fits into your budget will keep you motivated without setting you up for frustration (and failure).
Consider how much extra you can realistically pay each month, then calculate how long it will take to pay off your debts with those payments.
You may need to adjust your timeline as you go, but knowing when you’ll be debt-free can give you something to look forward to.
Track Your Progress and Celebrate Small Wins
Rebuilding your finances can take time, and it's important to recognize your progress along the way.
Tracking your debt reduction and celebrating small milestones - like paying off a credit card or reducing your overall debt by 10% - can keep you motivated and focused on the end goal.
Financial Rebuilding Step #4: Shift Your Money Mindset
When rebuilding after a financial setback, one of the most powerful tools you have is your mindset.
Your beliefs and attitudes about money can significantly impact your financial journey - whether you’re struggling to recover or confidently moving forward.
A shifting of your money mindset from scarcity to abundance, from fear to confidence, can make all the difference in your ability to not only rebuild but to thrive financially.
So, let’s talk about why your mindset matters and how you can start shifting yours today.
Recognize the Power of Your Beliefs
Your beliefs about money can either hold you back or propel you forward.
If you’ve ever thought, “I’ll never get out of debt” or “I’m just not good with money,” these are limiting beliefs that keep you stuck in a cycle of fear and anxiety around money, and it’s time for a mindset shift.
Instead, recognize that your thoughts shape your reality.
If you believe that you can rebuild and take control of your finances, you’ll find ways to make it happen.
The key is to become aware of the negative money thoughts you’ve been holding onto and start replacing them with empowering beliefs.
Action Tip: Start by journaling about your current beliefs around money. Are they holding you back or empowering you? Then, replace negative thoughts with positive affirmations, such as “I am capable of managing my money,” or “I am taking control of my financial future.”
Adopt an Abundance Mindset
A shift from scarcity to abundance can completely transform the way you approach money.
When you focus on scarcity, you feel as if there’s never enough - leading to stress, overwhelm, and the fear that you’ll never get ahead.
On the other hand, an abundance mindset opens up the possibility for growth and opportunity. It allows you to see possibilities instead of limitations.
An abundance mindset is all about trusting that there are plenty of resources available to you, whether it’s money, opportunities, or support.
This mindset doesn’t ignore reality. It just shifts the focus from what’s lacking to what’s possible.
Action Tip: Whenever you feel fear or doubt creeping in, remind yourself that there is enough for everyone, including you. Focus on opportunities, whether they come in the form of a new job, side hustle, or budgeting tip. You’ll start noticing the abundance in your life - big and small.
Focus on Financial Empowerment, Not Perfection
No one’s financial journey is perfect. We all make mistakes, face setbacks, and encounter challenges.
But what truly matters is how you approach those challenges.
When you view money as a tool for empowerment instead of a source of shame or guilt, you give yourself permission to grow and learn from your experiences.
So, instead of striving for financial perfection, focus on making consistent, positive progress.
Celebrate each win, no matter how small, keep moving forward, and acknowledge that setbacks are a part of life and that they don't define your future.
The most important thing is that you take responsibility for your financial choices and keep taking action to improve.
Action Tip: Change your language when talking about money. Instead of saying “I’m bad with money,” try saying “I’m learning how to make better money choices.” Every step you take to improve your finances is a step toward empowerment.
Cultivate a Growth-Oriented Mindset
A growth mindset is all about believing that you can improve through effort, learning, and persistence.
When it comes to money, this means that even if you’ve made poor financial choices in the past, you have the ability to change your habits and improve your financial situation.
Adopting a growth mindset means seeing challenges as opportunities to learn and grow. If you face setbacks, it’s an opportunity to evaluate your choices, gain new skills, and come back stronger.
With this mindset, you’ll stop seeing your financial situation as fixed or permanent. Instead, you’ll realize that your financial future is shaped by the actions you take today.
Action Tip: Start by setting small, achievable financial goals and treat every success as a learning experience. Whether it’s sticking to a budget for a week or paying off a small debt, recognize the growth in each milestone.
Practice Self-Compassion
When you’re facing a financial setback, it’s easy to be hard on yourself. Maybe you’ve made mistakes, or maybe you feel like you’ve failed.
But being kind to yourself during these moments is essential to your success.
Self-compassion allows you to forgive yourself for past mistakes and focus on moving forward, rather than getting stuck in shame or guilt.
Be gentle with yourself as you rebuild. It’s okay if things don’t happen overnight. What matters is that you’re committed to learning, improving, and taking action.
Remember to treat yourself with the same kindness and understanding that you would offer a close friend going through a tough time.
Action Tip: If you make a financial mistake, practice self-compassion by acknowledging it, forgiving yourself, and using it as a stepping stone for growth. Remind yourself that you are worthy of financial freedom and peace.
Financial Rebuilding Step #5: Build Resilience for the Future
Rebuilding after a financial setback isn’t just about bouncing back - it’s about developing the resilience to handle future challenges with confidence and strength.
Life will always throw curveballs, but building financial resilience means that you’ll be better equipped to face them head-on, stay calm, and recover quickly.
But, resilience doesn’t happen overnight. It’s a process of building habits, mindsets, and systems that keep you steady, even when financial storms hit.
Let’s talk about how you can build financial resilience for the future so that you’re ready for whatever comes your way.
1. Create a Solid Emergency Fund
We already talked about this one but I cannot stress it enough. A reliable emergency fund is one of the most effective ways to build resilience.
It is your financial safety net to fall back on when unexpected expenses arise so you don’t have to resort to credit cards or loans.
2. Build Healthy Money Habits
Resilience is built on good habits that keep you grounded, even when the going gets tough. It’s about creating routines that help you stay on top of your finances and prevent future setbacks.
Good money habits might include tracking your spending, reviewing your budget regularly, or checking your credit score.
These simple actions might seem small, but they add up over time and create a strong foundation for financial security.
The key is consistency. Make these habits part of your regular routine, so when setbacks come, you’re prepared to manage them with confidence and control.
3. Learn to Adapt and Be Flexible
Life is unpredictable, and sometimes things won’t go according to plan.
Building resilience means learning to adapt and adjust your approach when necessary. If something unexpected happens, instead of panicking or feeling defeated, focus on how you can adjust and find a solution.
Adaptability also means being open to new strategies. For example, if your original debt repayment plan isn’t working, don’t be afraid to pivot. Or if your income changes, look for creative ways to save or adjust your budget.
Flexibility allows you to flow with the challenges life throws at you instead of feeling overwhelmed by them.
4. Set Realistic Financial Goals
A big part of resilience is having a clear direction. When you set realistic and attainable financial goals, you create a roadmap that keeps you focused and motivated.
So, instead of feeling discouraged by a financial setback, use your goals as a guide to help you get back on track.
Start by breaking down your financial goals into small, achievable steps - whether it’s paying off a certain amount of debt, saving a specific amount, or investing in your retirement.
Having concrete goals will help you stay on course, even when challenges arise.
5. Build a Support System
One of the key elements of resilience is having a strong support system because you don’t have to rebuild your finances alone.
Surround yourself with people who encourage you, hold you accountable, and help you stay motivated during tough times.
This support system could be friends, family, a financial coach, or a community group.
Sometimes, just knowing that someone has your back can give you the strength to keep going.
6. Embrace a Growth Mindset
This is another one that we discussed before, but it should be part of your resiliency plan.
That’s because building resilience is also about cultivating a growth mindset.
A growth mindset encourages you to see mistakes as stepping stones rather than roadblocks. It allows you to stay optimistic and open-minded, trusting that with persistence and effort, you can continue improving.
So, instead of focusing on setbacks or failures, focus on the lessons you can learn from them.
Remember that every financial challenge is an opportunity to grow, develop new skills, and become more financially empowered.
Rebuilding After Financial Setbacks: Regain Your Financial Confidence, One Step at a Time
Rebuilding after a financial setback can feel overwhelming, but it’s absolutely possible. And with the right steps, you can come back stronger than ever.
Whether you’ve been hit by unexpected expenses, a job loss, or simply fell off track, it’s important to remember that this is not the end of your financial story - it’s just a chapter.
By acknowledging and accepting the situation, creating a solid financial reset plan, addressing your debt strategically, shifting your money mindset, and building resilience for the future, you can transform your financial outlook and start taking control of your financial journey.
These steps are your roadmap for rebuilding, and each small action you take brings you one step closer to financial confidence and stability.
Remember, this process takes time, and that’s okay. You don’t have to do it all at once. Start where you are, take things step by step, and celebrate each victory along the way. Building financial resilience is about consistency and growth—not perfection.
So, take that first step today. Rebuild your financial foundation and create a future where setbacks are just opportunities for growth. You've got this!
Ready to embrace your inner CFO? Join our community. Share your financial goals, budgeting tips, and success stories in the comments.
Taking control of your finances is not a one-time event but a journey that requires consistent effort and guidance.
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If you're ready to take the next step, The Woman CFO's Financial Coaching Programs are available now to guide you through transforming your mindset, building wealth, and achieving financial independence.
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