Everyone has hard times and financial hardship, and quite often it’s through no fault of your own. Life is full of twists and turns and we never really know where life will take us.
Sometimes life deals you a bad hand and you have to power through. Nevertheless, many people find themselves in a position of having to deal with financial hardship through no fault of their own.
That said, there are ways to get through these hard times, no matter how dark they may seem. Before we get in to the ways to handle it, remember that positive thinking goes a long way! I always use the mantra “this too shall pass.”
And it’s true, it will. You will get through this.
In this article, we’ll show you our best tips on how to get through a financial hardship.
What Is Financial Hardship?
Financial hardship is any period of time where you’re unable to meet basic living expenses for basic goods and services.
What Causes Financial Hardships?
Financial hardship can be caused by many different things. Here are some of the most common reasons that you may be faced with financial hardship.
If you get sick and are out of work for a period of time, this can cause financial hardship. This is especially true if you’re the breadwinner of the family.
Unfortunately, many people don’t have short-term or long-term disability coverage with their employers.
This means that if they’re too sick to work they have to use any paid time off in order to get paid.
Once they use up their paid time off, any other days away from work are unpaid.
If you have a long illness, it’s very easy to become financially strapped because you’re not getting a regular paycheck.
If you suddenly lose your job due to being laid off or fired, you can also have a financial hardship on your hands.
Sometimes when you’re let go, your employer will work out an arrangement so you receive severance pay, but this isn’t required by law.
And while you may qualify for unemployment benefits, it depends on the circumstances of you leaving your employer.
And keep in mind that if you do qualify for unemployment benefits, there is usually a waiting period before you get any money.
So you likely won’t see any benefits for a couple of weeks. This lapse in regular income can cause financial hardship.
Plus, unemployment benefits don’t replace the salary you are making, only a portion of it. And if you are a high income earner, these benefits won’t come close to replacing your prior income, which is why it’s so important to have an emergency fund.
If you’re in an accident, this can also cause financial hardship in that you may not be able to work for a period of time due to being injured.
If you’re hurt at work, there may be workman’s compensation coverage that you can tap into, but it depends on your circumstances.
And if you’re hurt in an accident outside of work, you may or may not get assistance from any short or long term disability coverage you have.
Unfortunately, if there’s no money coming in, you’ll need to figure out how to get through the financial hardship.
Divorce happens regularly and it’s usually not a good thing financially for either person.
In any marriage, one spouse usually earns more than the other, so divorce for the lesser earning spouse can really put a damper on their finances.
Plus, divorce attorneys are an added expense that will put more stress on the finances for both partners.
Think about if your home got damaged in a storm or with floodwater.
Hopefully you have enough homeowners insurance to cover damages, but if not, this can be a big financial burden and lead to a long term financial hardship situation.
Death of A Spouse or Partner
Unfortunately people pass away all the time and leave their spouse financially unprepared.
If the surviving spouse doesn’t have enough income or savings to cover living expenses, this can create financial hardship.
How to Get Through A Financial Hardship
Don’t fret though, there are ways you can get through a financial hardship. But before we go there I want to reiterate the importance of having an emergency fund with at least 6 months of living expenses.
An emergency fund can greatly reduce the amount of hardship you experience.
On that same note, if you’ve been following all the recommendations of this blog and have made it to financial freedom, you can avoid (for the most part) any major financial hardships.
Cut Discretionary Spending
The first thing to do to get through a financial hardship is to cut discretionary spending.
This means to stop spending money on anything that isn’t absolutely necessary for you and your family.
So things like going to restaurants, getting coffee and hitting happy hour are all off the table. Same goes for almost all purchases.
In fact, you really shouldn’t buy anything other than groceries and very limited personal items.
While you’re going through a financial hardship you want to conserve all the cash that you can. I’d also suggest cutting any streaming services and any subscriptions.
These things aren’t considered essential and you can put that money towards the things that are essential.
Take On More Work – Get A Side Gig
When you’re having financial issues you need all the money you can get. So do everything you can to increase your income.
This may mean picking up more hours at work or getting a part-time job.
If you can’t commit to more work long term, think about getting a flexible side gig that you can do from home.
With a side gig you can work as much or as little as you want and if you’re freelancing, you can set your own rates.
Plus with many types of side gigs you can get paid fast – sometimes even daily which is nice when you’re having money problems. Here are some ideas for a side gig:
- Teach English Online
- Become a Virtual Assistant
- Night Time Jobs
- Make $500 with Surveys
- Freelance Writing Jobs
- Build a Profitable Blog
Ask Lenders About Their Programs
One thing you definitely want to do is reach out to any lenders and see if they have financial hardship programs that you qualify for.
And, don’t wait to contact your creditors. You want to contact them right away, before you miss any payments, to let them know what’s going on.
Many lenders offer financial hardship programs to help consumers in time of need. It’s smart for the finance company because they want to do whatever they can to insure they get paid.
If they work with you and give you flexible terms it benefits them just as much as it benefits you as you’re more likely to pay your bill versus filing bankruptcy.
So even if you need more time to pay your bill, they’d still rather give you extra time to get things paid vs. having you file bankruptcy.
Plus, some creditors have programs where they will temporarily waive interest to allow you to catch up on your bills.
If you can’t make your mortgage payment, make sure you send a hardship letter to your mortgage lender.
You want to tell them in writing that you’re having financial difficulties and ask for a loan modification plan.
And follow up with utility companies, too. Utility companies often have energy bill assistance programs that you may qualify for.
Call your creditors and see if you can negotiate your bills. Many creditors will work with you. For instance, medical providers are known to work with people facing financial hardships.
The providers would rather get paid less than not get paid at all, which could happen if you’re facing extreme financial issues.
Other creditors may be open to negotiating your bill as well. It can’t hurt to try and it may save you a lot of money.
At the very least, your creditors will be aware that you’re having financial issues.
Take Advantage of Local and Federal Assistance Programs
There are many local and federal assistance programs that you may qualify for. Look around your community for food banks and other services that can help you.
Check into any programs that community partners may offer. Places like the Salvation Army and Catholic Charities may have special programs in place that can help you.
Churches also can be a source of assistance when times are tough.
Many churches and other places of worship have money budgeted to help out community members in time of need.
It doesn’t hurt to reach out to your local church and see if they can offer any help to you and your family.
Use Your Emergency Fund
Hopefully you have an emergency fund that you can tap into, like we discussed above.
If not, start one as soon as possible. The sooner you have an emergency fund, the better position you’ll be in to get through another financial hardship.
Take a Loan From Your 401K
If you have money in your 401K, check into taking a loan. Usually the interest rate is pretty favorable and the terms of the loan may be flexible.
Keep in mind that normally if you take a 401K loan, your loan payments are deducted from your paycheck. And if you leave your job you may be required to pay your loan back in full immediately.
Plus, you may be required to pay it back within a certain timeframe. And you will pay interest.
But again, if you’re trying to get through a financial hardship, it’s definitely an option worth looking into.
Don’t Resort To Payday Loans
Payday loan companies have a bad reputation for good reason. While they make it very easy to get money quickly, usually not even bothering with a credit check, you’ll pay a very high price for taking the loan.
No matter how desperate you get, don’t get a loan from one of the payday loan companies. The interest rates are insane and it’s totally not worth it.
Once you get into the cycle of taking payday loans, it may be difficult to get out of that cycle.
Avoid the payday loan places no matter what! Use some or all of the other options we list above instead.
It is totally possible to get through a financial hardship.
Don’t give up on getting through this financial hardship. Remember, there will be better days ahead!
Have you had to deal with financial hardship? Comment below and share your experience with us.